Gun-Jumping under Irish Merger Control – New Armoury for the CCPC

The Competition (Amendment) Act 2022 has introduced a number of important changes to gun-jumping under Irish merger control. These changes address some gaps in the existing legislation as well as expanding gun-jumping to transactions called-in by the Competition and Consumer Protection Commission (CCPC). Some things have not changed. In particular, gun-jumping remains a criminal offence under Irish merger control.

Procedural and substantive gun-jumping under Irish law     

Gun-jumping is the term used to describe putting a merger or acquisition into effect prior to obtaining merger approval. Most merger control regimes impose some form of suspensory or standstill requirement to give competition regulators the opportunity to consider the merger or acquisition prior to it being put into effect. The suspensory requirement essentially preserves the status quo so that in the event of a prohibition decision, the target business or the merged businesses have not been integrated. In other words, it is not necessary to unscramble the proverbial egg.

There are essentially two types of gun jumping. Procedural gun-jumping refers to a failure to notify a notifiable or called-in transaction. Substantive gun-jumping refers to the implementation of the transaction before the approval decision.

Prior to the Competition (Amendment) Act 2022, substantive gun-jumping was not an offence under Irish law (although procedural gun-jumping was an offence). A transaction that was put into effect prior to approval was merely “void” as a matter of Irish law until the CCPC issued its determination clearing the transaction. While there were at least twelve mergers and acquisitions initially declared void as a result of putting the transaction into effect prior to notification, none of these transactions were prohibited by the CCPC.

There have been two convictions for procedural gun-jumping in the Irish courts under the Competition Act 2002. In 2017, the CCPC commenced an investigation into a suspected failure to notify the CCPC of the acquisition of Lillis-O’Donnell Motor Company Limited by Armalou Holdings Limited. The transaction was subsequently notified and cleared by the CCPC. The CCPC referred a file to the Director of Public Prosecutions (DPP) which culminated in two undertakings pleading guilty to charges arising out of the failure to notify prior to the transaction being put into effect. The District Court judge applied the Probation Act 1907 in both cases on condition that the undertakings made a charitable donation of €2,000 each and contributed to the costs of the prosecutions.

Changes to Gun-Jumping under Irish Merger Control

The Competition (Amendment) Act 2022 has enhanced the offence of gun-jumping under the Competition Act 2002 principally in five ways.

First, the 2022 Act introduces a new offence for substantive gun-jumping. The Act provides that where a merger or acquisition is “put into effect” or “purports to be put into effect” prior to approval, it can be prosecuted both as a summary offence or as an offence on indictment. An undertaking or a person in control of the undertaking (i.e. any officer of the company or a partner in a partnership) who knowingly and wilfully authorised or permitted the contravention is liable to a fine of up to €3,000 on summary conviction or €250,000 on conviction on indictment. The Act also provides for daily default fines of €300 on summary conviction and €25,000 on conviction on indictment.

Secondly, in addition to the offence of failure to notify a notifiable merger or acquisition, it is now an offence under the Competition Act to fail to notify a called-in transaction. This is specially aimed at the mergers or acquisitions which fall below the thresholds for mandatory notification but which the CCPC considers have an effect on competition in markets for goods or services in Ireland. The CCPC has new powers to call-in these transactions and this is supported by the new offence of failing to notify a transaction which has been called-in by the CCPC.

Thirdly, the CCPC has been given the power to bring summary proceedings for a failure to notify. These cases will be brought in the District Court. The CCPC does not have the power to prosecute substantive gun-jumping offences. The DPP retains the power to prosecute procedural gun-jumping both on a summary basis and on indictment and can also prosecute substantive gun-jumping on a summary basis or on indictment.

Fourthly, the CCPC has new powers to impose interim measures while it is carrying on its investigation. In particular, the CCPC can require undertakings to refrain from taking any steps toward (a) putting the transaction into effect or (b) for mitigating the impact of any step already taken to put the transaction into effect including orders in relation to safeguarding assets, prohibiting the termination of key employees and prohibiting the integration of IT systems.

Fifthly, where the CCPC determines (following a Phase 2 investigation) that the merger or acquisition will substantially lessen competition in markets for goods or services in Ireland, the CCPC may determine that the transaction should be unwound or dissolved. The unwinding or dissolution must restore the situation prevailing prior to the merger or acquisition being put into effect or where that is not possible, the CCPC can require the parties to take such steps to achieve restoration as far as practicable to the situation prevailing prior to the merger or acquisition being put into effect.

Will the CCPC pull the trigger?

While the CCPC now has power to bring summary proceedings for failure to notify, the criminal standard of proof has not changed. Proof beyond reasonable doubt is a high standard particularly in gun-jumping cases which often involve complex calls on whether certain behaviour, structures, covenants, contractual provisions, etc. amount to full or part implementation of the merger or acquisition. If prosecutions are brought, it is likely that for the most part, those prosecutions will involve undertakings rather than individuals given the added requirement to prove (beyond a reasonable doubt) in the case of individuals that they knowingly and wilfully jumped the gun.

The criminal standard for gun-jumping notably contrasts with the standard of proof for investigations under the new administrative sanctions regime introduced by the 2022 Act. Under that regime, an “adjudication officer” will make a decision on an alleged competition law infringement on the balance of probabilities. This raises the question as to whether substantive gun-jumping could or should be investigated and prosecuted under the administrative sanctions regime as a breach of the substantive competition rules i.e. as an infringement of the prohibition against anti-competitive arrangements or an abuse of dominance. This could potentially be a new weapon for the CCPC.

The inclusion of two separate offences for procedural and substantive gun-jumping raises the possibility of fines for both types of gun-jumping as seen in the Altice/PT Portugal (Case M.7993). If there is a dual prosecution for both procedural and substantive gun-jumping, it will be the DPP that prosecutes the case as the CCPC does not have power to prosecute substantive gun-jumping even on a summary basis.

Gun-jumping has clearly been enhanced under the Irish merger control rules by the Competition (Amendment) Act 2022. Nevertheless, gun-jumping is rarely black and white and there is every likelihood that the Irish courts will have a role to play when the new armoury is deployed.

For more information on this topic, please contact Anna-Marie Curran, Partner or any member of A&L Goodbody's EU, Competition & Procurement team.

Date published: 15 December 2023