On 8 April 2019, Armalou Holdings Limited pleaded guilty before the Dublin Metropolitan District Court in the first criminal prosecution taken for gun-jumping in Ireland.
The Company had put a merger into effect before notifying and obtaining the approval of the Competition and Consumer Protection Commission (“CCPC”). Failing to notify a notifiable merger or acquisition is a criminal offence under Irish competition law.
It was reported that Armalou Holdings was unaware of its obligations so this case serves as a timely opportunity to remind businesses and practitioners of the rules regarding the compulsory notification and the standstill obligation for mergers and acquisitions.
Under sections 18 and 19 of the Competition Act 2002, mergers or acquisitions between businesses whose turnover in the State exceeds specific revenue thresholds must be notified and approved by the CCPC prior to being completed or put into effect. Failing to notify a merger or acquisition and/or implementing the transaction prior to receiving CCPC approval is often referred to as “gun-jumping”.
Gun-jumping may arise in a wide range of circumstances. Indeed, a transaction is considered “put into effect” when the purchaser can exercise a “decisive influence” over the target entity. Pre-merger planning is permitted but the border with prohibited behaviours is slight. The parties involved should remain independent of one another and limit cooperation until clearance.
Failing to notify is a criminal offence. Parties found guilty can be subject to penalties of up to €3,000 (on summary conviction) and €250,000 (on conviction on indictment) as well as penalties of up to €300 (on summary conviction) and €25,000 (on conviction on indictment) per each subsequent day of noncompliance. Implementing a notified transaction pre-clearance by the CCPC is not a criminal offence but the transaction is considered void until it is approved by the CCPC. It is also the practice of the CCPC to publicly criticise any failure to comply with the standstill obligation. In theory, if the implementation of the transaction was likely to give rise to anti-competitive effect, the CCPC retains the power to apply to the High Court of injuctive relief under Section 14 of the Competition Act 2002.
In conclusion, the mandatory notification regime and rules against “gun-jumping” are designed to allow the CCPC to scrutinise mergers and acquisitions before they are put into effect and therefore help avoid any competition issues in the market as well as any damage to consumers. Therefore, failing to comply with these rules can have serious consequences: if the merging parties fail to comply with their obligations, they can face criminal prosecution, penalties, voidness of the transaction and reputation damage.
1 Mergers and acquisitions must be notified if, in the most recent financial year, the aggregate turnover in the State of the undertakings involved is at least €60 million; and if the turnover in the State of each undertaking involved is at least €10 million. Media mergers must also be notified irrespective of the turnover of the undertakings involved.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.