The Competition and Consumer Protection Commission ("CCPC") has published its annual Mergers & Acquisitions Report for 2020 (the "Report"), providing details and statistics regarding the mergers and acquisitions examined by the CCPC in 2020.
- In a year which witnessed severe economic disruption caused by the COVID pandemic, the CCPC experienced just a 13% reduction in merger notifications as compared with 2019, noting that the sectors that have seen an increase in M&A activity or otherwise remained unaffected by the impact of COVID such as Information & Communications and Healthcare, which accounted for a significant proportion of merger notifications.
- The introduction of the CCPC's simplified procedure in July also now clearly demonstrates that parties can secure clearance for 'no issues' deals in less than 3 weeks.
- The CCPC's track record on remedies is unusual internationally - along with having a relatively lower intervention rate as compared with the European Commission, the CCPC is more willing to accept 'behavioral' remedies (eg, ring-fencing obligations, access remedies) in both horizontal and vertical mergers than requiring divestment remedies.
- Looking ahead into 2021, the CCPC anticipates possible changes to its substantive assessment of transactions to take account of the impact of COVID on markets and a possible increase in complex merger reviews as a result of Brexit.
The key findings of the Report are outlined as follows:
- Notifications - the CCPC received a total of 41 merger notifications, representing just a 13% decrease of notified mergers from 2019, despite the significant economic turmoil. The most prominent sectors for 2020 were Information & Communications and Healthcare, both of which saw an increase in merger notifications from the previous year, while there was a sharp drop in notifications in the Real Estate, Manufacturing and Motor sectors.
- The CCPC issued 43 determinations (or clearance decisions) during the year - 32 of which related to notifications made in 2020, with the remaining 11 relating to notifications carried over from 2019.
- 15 investigations involved as extended Phase 1 review - of which 12 were cleared unconditionally, two were subject to a Phase 2 investigation (Link/Pepper, ESB/Coillte (JV) - both ongoing) and one is still under review within the extended Phase 1 review (Brookfield (Greenenergy)/Amber Oil).
- Formal commitments to secure clearance were obtained in just one case in 2020 - CVC Funds/Celtic Rugby DAC (involving a behavioral commitment by the acquirer to voluntarily notify the CCPC in the event it acquires control over the commercial activities of the Six Nations competition without meeting the CCPC's mandatory notification thresholds). Separately, the CCPC also oversaw the implementation of divestment remedies in two other cases, namely Berendsen/Kings Laundry (see previous article here) and Enva/Rilta.
- Phase 1 clearance timeframes - the average timeframe for Phase 1 clearance (excluding extended reviews) in 2020 was 23 working days (as compared with the statutory 30 working day period). The timelines varied from 10 to 29 working days (noting the introduction of the CCPC's simplified procedure). Notably, the 2020 average also marked a reduction of around 2 business days from the 2019 average.
- Media mergers - the CCPC reviewed four media mergers, clearing three of these (Reach/ISL, Greencastle/Maximum Media, Rocketsports/BenchWarmers) within the initial Phase 1 review period and subjecting one (DMG/JPIMedia) to an extended Phase 1 review which it ultimately cleared unconditionally.
- Simplified Merger Procedure - 2020 was also marked by the introduction of the CCPC's Simplified Merger Notification Procedure which allows for a 'fast-track' review of transactions that meet certain conditions where no competition issues arise (see our previous article here). Following its introduction in July, seven transactions were notified under the new procedure and were cleared with an average clearance timeframe of around 13 working days.
- Other developments - the Report also notes that consideration has been given to the possible impact of the COVID pandemic on the merger review regime and that the CCPC will continue to monitor developments and consider any changes which may be needed, seemingly including to its substantive assessment of whether a transaction results in a substantial lessening of competition. Similarly, the Report also outlines that the CCPC is working to prepare for a possible increase in complex merger reviews as a result of Brexit. Finally, the CCPC has stated that, in tandem with other regulators in Europe, a considerable amount of work will be necessary to devise measures to deal with the fast-paced movement of the digital sector. Overall, the Report provides a helpful overview of the CCPC's merger activity in 2020 and seeks to anticipate a number of possible features of the CCPC's merger review in 2021.
Merger Remedies Review 2003-2020
Finally, the Report also includes a special section with statistics on the number of transactions that have been cleared subject to commitments over the period 2003 to 2020:
- The Report notes that the CCPC and, formerly, The Competition Authority ("TCA") have approved 33 mergers subject to commitments to mitigate potential competition concerns, amounting to just over 3% of all decisions made in that period. This compares with a figure of 5.6% by the European Commission representing the number of commitment decisions issued as a proportion of its total decisions over the same period.
- In terms of the breakdown of the 33 commitments decisions by the CCPC/TCA over the period 2003-2020:
- 66% of commitments involved behavioral remedies, ie, remedies that are designed to modify or constrain the future conduct of merging firms. Half of these involved 'ring-fencing' commitments to prevent the flow of competitively sensitive information, followed by obligations to voluntarily notify subsequent transactions (17%), access remedies (12%) and other behavioral remedies (21%).
- 25% of commitments involved structural remedies, ie, divestments of businesses or assets to a competitor.
- The remaining 9% involved 'mixed' commitments involving both behavioral and structural remedies.
- The majority of decisions involving commitments (23 or 70%) concerned mergers with horizontal overlaps (ie, the merging parties were competitors), 5 or 15% concerned mergers with vertical overlaps (ie, the merging parties had a supplier/customer relationship) and 5 or 15% concerned mergers with both horizontal and vertical overlaps.
- Of the 33 commitment decisions between 2003-2020, 20 commitments have expired, while 13 continue to apply. Six of these have defined expiry dates lasting up to a maximum of 5 years, and 7 will remain in force until certain ownership/shareholdings change or until the CCPC considers that the commitments are no longer required.
- Finally, for the period 2003-2020, the majority of commitments were required in media mergers (27%), following by retail/wholesale (18%) and energy/utilities (12%).
Originally published 14/01/2021
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