New mergers to face tough approval test

LARGER Irish firms contemplating a merger look set to face a tougher approval process following the recent hand-over of responsibility for merger control by the Department of Enterprise, Trade & Employment.

This responsibility has now been handed over almost completely to the Competition Authority and yesterday, its chairman, John Fingleton stressed that a merger would only be permitted if it did not lead to a “substantial lessening in competition in the State”.

Commenting on the new rules, the head of the Authority’s Mergers Division, Dermot Nolan, said that the change would: “Bring more transparency and political independence to the system. More economic reasoning would be introduced into merger regulation.”

When questioned about his attitude to certain high profile mergers such as that between Avonmore and Waterford Co-ops leading to the formation of Glanbia, the Authority’s Chairman, Mr Fingleton indicated that he might have made final approval of the deal conditional on a disposal by Avonmore of its Premier milk distribution business.

However, the Chairman added that the deal as a whole would not have been blocked even if he had been in charge of the approval process rather than the Minister.

“Avonmore and Waterford were each in at least twenty relevant markets, most of which were international. There was plenty of scope for potential entrants and customers had, and have, a lot of buying power.”

The Competition Authority Chairman predicted that a slightly larger number of proposed deals would be subjected to a more detailed examination known as Phase Two where the Authority is allowed an additional three month period to carry out an in depth investigation of the likely effects of completion of the proposed merger in question.

One or more firms involved might promise, for example, not to enter into exclusivity deals with particular customers.

According to Mr Fingleton, it is anticipated that between forty and fifty “substantial” mergers will be referred to his organisation, each year.

The figure would be greater, but for the introduction of the higher financial thresholds.

In fact, the financial thresholds have been raised and at least one of the participants in the deal must have a turnover in the State of at least €40 million a year, up from €25m.

Special rules apply, however, in the case of media mergers. In such cases, details of mergers, regardless of the size of the companies involved, will have to notified to the Authority.

Here, unlike in the case of other mergers, the Minister of Enterprise, Trade & Employment retains a role. Ms Harney may decide to overrule an approval granted to a deal by the Authority. If the Authority decides against approval, this decision cannot, however, be reversed by the minister.