Irish Competition Authority Decisions

1. Section 4(1) of the Competition Act, 1991 states that 'all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State or in any part of the State are prohibited and void.' Section 4(4) as amended by Section 5 of the Competition (Amendment) Act, 1996 provides that:

‘4(a) The Authority may certify that in its opinion, on the basis of the facts in its possession-

(i) an agreement, decision or concerted practice, or

(ii) a category of agreements, decisions or concerted practices,

does not contravene subsection (1).’

Section 5(b) of the 1996 Act provides that:

‘Where a certificate under this subsection covers a category of agreements, decisions or concerted practices, any agreements, decisions or concerted practices (as the case may be) within that category need not be notified under section 7 to benefit from the certificate.’

2. In the view of the Authority an agreement between undertakings for the sale of a business is not automatically outside the scope of Section 4(1) of the 1991 Act. The Authority considers that this applies equally to agreements which constitute a merger or takeover as defined by the provisions of the Mergers Act, 1978 as amended by the Competition Act, 1991. [1] The Authority is of the opinion, however, that in many cases a merger or sale of business will not have any adverse effect on competition and so will not contravene the prohibition on anti-competitive agreements contained in Section 4(1) of the 1991 Act. The Authority is able to define circumstances in which an agreement for a merger or sale of business will not prevent, restrict or distort competition. In such circumstances it deems it appropriate that it should issue a category certificate to assist businesses and to reduce the need to notify agreements which are not anti-competitive.

3. A merger for the purposes of this certificate takes place when two or more undertakings at least one of which carries on business in the State, come under common control. Undertakings shall be deemed to be under common control if the decisions as to how or by whom each shall be managed can be made either by the same person, or by the same group of persons acting in concert.

4. Without prejudice to the above , where one undertaking obtains the right in relation to another undertaking, which is a body corporate, to:

(a) appoint or remove a majority of its board or committee of management;

(b) shares in it which carry 25% or more of the voting rights

the two undertakings shall be deemed to have come under common control.

5. For the avoidance of doubt, common control exists in any circumstances where one undertaking controls the commercial conduct of the other. This may for example be the case where the conditions of a loan or other contract between the undertakings give a contractual right to veto all or some specified commercial decisions of the other.

6. A sale of business takes place when all, or a substantial part, of the assets, including goodwill, of an undertaking are acquired by another undertaking.

7. The acquisition of some or all of the assets of an undertaking by a receiver, liquidator or examiner does not constitute a merger or sale of business. However, although it is not the subject matter of this category certificate the Authority draws attention to the fact that an agreement between undertakings by which one makes a loan to the other with the result that it may obtain the right to appoint a receiver over the assets of that other on default is capable of being an agreement of the kind defined in Section 4 of the Competition Act 1991.

8. This category certificate is relevant to all mergers and sales of business without limitation as to the size or turnover of the undertakings involved.

9. Section 3(1) of the Competition Act defines an undertaking as 'a person being an individual, a body corporate or an unincorporated body of persons engaged for gain in the production, supply or distribution of goods or the provision of a service.' The Supreme Court has ruled that the phrase for gain is to be interpreted as ‘for a charge or payment.’ Thus the definition of undertaking is quite wide ranging and it is clear that firms generally come within this definition. The Authority has indicated in a number of decisions involving agreements for the sale of a business that, in its view, individuals who are parties to such an agreement also generally come within the definition of an undertaking. In Nallen/O’Toole [2] the Authority decided that partners in a business were each undertakings. In Budget Travel [3] it decided that, where an employee purchased the business of her employer, she was an undertaking. In ACT/Kindle [4] the Authority took the view that, where a number of individuals collectively held a majority share holding in a business, they would be regarded as undertakings. In Scully/Tyrrell [5] it took the view that a group of individuals could be regarded as undertakings, even though they did not hold a majority of the shares in a business, but nevertheless were able to exercise a significant degree of control, by virtue of the contractual arrangements involved and because their interests differed from those of the company in which they held those shares. [6]

10. The Authority believes that a merger may, on occasion, have the object and/or effect of preventing restricting or distorting competition. The primary objective of a merger may in fact be the elimination of a competitor and a lessening of competition. Equally the Authority recognises that many mergers take place for entirely legitimate business reasons and have no anti-competitive object or effect. The present decision is designed to certify agreements for mergers and sales of business which, in the Authority’s opinion, are unlikely to contravene Section 4(1). As a general rule the Authority considers that before a merger or sale of business can be found to offend against Section 4(1) of the Competition Act, it must be shown that it would, or would be likely to, result in an actual diminution of competition in the market concerned.

11. A horizontal merger involves two or more undertakings which are competitors in one or more markets. By definition such a merger reduces the number of competitors in the market, at least in the short-term. A reduction in the number of competitors or the fact that a merger will result in the merged entity having a larger share of the market than that previously held by either of the merged undertakings individually, are not, of themselves, sufficient to establish that the merger would result in a diminution of competition. A merger would, in the Authority's opinion, contravene Section 4(1) where it resulted in, or would be likely to result in, a lessening of competition in the relevant market such as would allow, for example, the merged undertaking or all of the remaining firms in the market to raise their prices, as the effect of the arrangement would be to restrict or distort competition. Other factors, such as the ease with which new competitors could enter the market, are also relevant in assessing a merger in the Authority's view. Among the factors which the Authority believes needs to be considered in order to decide whether a merger would have the effect of preventing, restricting or distorting competition is the actual level of competition in that market, the degree of market concentration and how it is affected by the merger, the ease with which new competitors may enter the market and the extent to which imports may provide competition to domestic suppliers.

12. The Authority believes that where post-merger market concentration levels are relatively low, a merger or sale of business would not have any adverse effect on competition in a market. There are two relevant measures of market concentration which can be used in this context. These are the four firm concentration ratio and the Herfindahl-Hirschman Index (HHI).

13. The four firm concentration ratio measures the combined market share of the four largest firms in the relevant market. The HHI is the sum of the squares of the shares of all firms in a market. It is in many respects a better measure of market concentration than the four firm concentration ratio since it takes into account the relative size of all of the firms in the relevant market. The fact that information on market shares of all the firms in a market is required to calculate the HHI means that, it may be difficult to estimate on occasion. It is true that an accurate approximation of the HHI can be arrived at provided one has information on the market shares of the largest firms in a market, while the extent of the change in the HHI arising as a result of the merger can be calculated on the basis of the market shares of the two firms involved. As the HHI provides more accurate information on market structure and concentration, the Authority believes that it should be used wherever possible. Where there is inadequate information on market shares to estimate the HHI to a reasonably high degree of accuracy the Authority will use the four firm concentration ratio.

14. The HHI is used by the US Department of Justice to evaluate mergers and its guidelines classify markets into three categories. Where the post-merger HHI is below 1000 the market is regarded as unconcentrated and mergers in such markets are considered unlikely to have adverse effects on competition. Where the post merger HHI lies between 1000 and 1800 the market is regarded as moderately concentrated. Mergers which increase the HHI by more than 100 points in such markets are considered to potentially raise significant competitive concerns depending on other factors. When the HHI exceeds 1800 the market is regarded as highly concentrated, although even in this case, a merger raising the HHI by less than 50 points, is considered unlikely to have adverse competitive consequences. The Authority recognises that in a small economy such as Ireland market concentration ratios in many sectors may be high relative to those which exist in much larger economies. The Authority also recognises that where market concentration following a merger is found to be relatively high that the merger need not necessarily restrict competition. While recognising that the thresholds applied in this instance were developed for larger economies it nevertheless considers that they provide a useful guide. In the Authority’s opinion a merger is unlikely to have any adverse effect on competition where:

(i) The HHI post-merger is below 1000; or

(ii) The HHI post-merger is between 1000 and 1800 but has increased by less than 100 points as a result of the merger; or

(iii) The HHI post-merger is above 1800 but has increased by less than 50 points as a result of the merger.

15. Where the four firm concentration ratio rather than the HHI is used to calculate market concentration levels, the Authority considers that if the post-merger four firm concentration ratio is 40% or less, a merger would be unlikely to have any adverse effect on competition. Thus in the Authority’s opinion a merger or sale of business does not contravene Section 4(1) of the Competition Act, 1991 if the four firm concentration ratio in the relevant market following the merger is below 40%.

16. In the Authority’s opinion any merger which could potentially create or strengthen a dominant position in a relevant market would require a careful analysis. For this reason the Authority believes that a horizontal merger between two firms where either firm has a market share of 35% or more should be subjected to individual scrutiny. Consequently such a merger is excluded from the coverage of this category certificate.

17. Where post-merger concentration levels exceed the thresholds set out in paras 15 and 16, the Authority believes that other factors must also be taken into account. The Authority considers, for example, that, even in relatively highly concentrated markets, a merger will not have adverse effect on competition in the absence of any barriers to entry or where there is a significant level of competition from imports.

18. Economic analysis indicates that firms in a market can only earn above normal profits in the long run if, for some reason, it is difficult for new firms to enter. In the absence of entry barriers the entry of new firms, or even the threat of entry, would be sufficient to force prices and margins down to competitive levels. There is some disagreement among economists regarding the importance of entry barriers. Some would argue that only legal barriers to entry should be regarded as an entry barrier. Others would define an entry barrier as a cost which must be borne by a new entrant but which an incumbent firm does not or has not had to bear. There are numerous examples in economics literature of ways in which incumbent firms will seek to deter entry. In some instances such behaviour will involve strategic moves designed to put barriers in the way of new entrants. In the Authority’s opinion if new entrants are attracted to a market by high profits but cannot successfully enter it, this is an indication of the possible existence of entry barriers in the market in question. In the absence of any evidence of barriers to entry in the relevant market, in the Authority’s opinion, a merger or sale of business involving competing undertakings, does not contravene Section 4(1), irrespective of the level of market concentration post-merger.

19. The Authority also considers that a horizontal merger will not have any adverse effect on competition where there is a significant degree of competition from imports. Obviously if products are currently imported prior to the merger, then such imports will be reflected in market share statistics already. Nevertheless, where it can be shown that, although the merger may result in levels of market concentration above those specified in paras 14 and 15, there is a strong likelihood that any increase in price would be unsustainable because it would lead to an increase in imports from existing suppliers, or of imports from suppliers previously not engaged in the market, in the Authority’s opinion, the merger or sale of business would not contravene Section 4(1).

20. At the same time, however, the Authority considers that where market concentration exceeds the thresholds set out in paras 14 and 15 above, a merger or sale of business between firms who are potential competitors could have an adverse effect on competition. A potential competitor can exercise a significant restraining influence on the behaviour of firms in a market. In particular it can act as a significant check on the market power of existing firms who are unlikely to increase their prices if they believe it will lead to the entry of firms currently located outside the market. Consequently the Authority considers that there is a risk that a merger or sale of business, which results in the removal of a potential competitor from the market, would have an adverse effect on competition, where market concentration levels were already relatively high. [7] A merger involving potential competitors would not, in the Authority’s opinion contravene Section 4(1) where:

(i) The HHI was below 1800; or

(ii) The four firm concentration ratio was 40% or less.

21. Where the relevant market was relatively highly concentrated and a particular potential competitor had a comparable advantage in entering the market, then the Authority considers that such a merger could well have an adverse effect on competition. Where it could be shown that a number of other potential competitors enjoyed a similar comparable advantage, the Authority considers that a merger between potential competitors would not contravene Section 4(1). Where the advantage was unique to the potential entrant or where there were less than two other potential competitors with similar advantages then the Authority believes that further examination would be required and such a merger would not benefit from this certificate.

22. Where there is already evidence of inadequate competition in a market, a merger between actual or potential competitors poses a high risk that competition will be further diminished. This point is recognised, for example, in the US Department of Justice Merger Guidelines which state that:

‘When the market in which the proposed merger would occur is currently performing noncompetitively, the Department is more likely to challenge the merger. Non-competitive performance suggests that the firms in the market already have succeeded in overcoming, to some extent, the obstacles to effective collusion. Increased concentration of such a market through merger could further facilitate the collusion that already exists. When the market in which the proposed merger would occur is currently performing competitively, however, the Department will apply its ordinary standards of review. The fact that the market is currently competitive casts little light on the likely effect of the merger.

In evaluating the performance of a market, the Department will consider any relevant evidence, but will give particular weight to the following evidence of possible non-competitive performance when the factors are found in conjunction:

(a) Stable relative market shares of the leading firms in recent years;

(b) Declining combined market share of the leading firms in recent years; and

(c) Profitability of the leading firms over substantial periods of time that significantly exceeds that of firms in industries comparable in capital intensity and risk.’ [8]

23. Mergers between firms which operate at different stages in the production or distribution process, i.e. between a firm and its suppliers or a firm and its distributors or retailers, generally pose less risks to competition than mergers between actual or potential competitors. In certain circumstances, however, vertical integration resulting from vertical mergers could have anti-competitive effects. Such a merger could, for example, be designed to block access either to sources of raw materials or to distribution outlets. Nevertheless the Authority believes that in general such mergers would not contravene Section 4(1). A vertical merger would be regarded as anti-competitive where it was considered likely to result in market foreclosure. Any merger between firms which had the effect of foreclosing entry to one or more markets would, in the Authority’s opinion contravene Section 4(1) and would therefore not be covered by this category certificate. The Authority articulates it view set out in Xtravision/Blockbuster that analysis of vertical mergers should focus on an analysis of the share of the market foreclosed to competitors, entry barriers and any elimination of potential competition.

24. Mergers and sale of business agreements commonly include provisions which restrict the seller in various ways from competing in the relevant market for a period of time following completion of the transaction. Such provisions may consist of restrictions on the seller competing with the business, soliciting customers or staff, using or disclosing technical know-how or other confidential information. As a general rule an agreement which imposes restrictions on an undertaking competing are anti-competitive and contravene Section 4(1). In the Authority’s opinion, an exception to this general rule has to be made in respect of provisions in a sale of business agreement which restrict the vendor from competing with the business being sold, provided they are subject to certain limitations.

25. It is widely recognised in competition law in other countries and in the common law that some restraint on a party disposing of all or part of his interest in a business is essential for the proper transfer of the goodwill of the business to take place, and that without the transfer of such goodwill, the transfer of ownership would be incomplete. The Authority agrees with this view. The restraint must, however, be limited in terms of its duration, geographical coverage and subject matter to what is necessary to secure the adequate transfer of the goodwill. Provided this is the case, then clearly the intention of such a restraint is not to restrict competition in the market in question.

26. It is clear that the length of time necessary for the full transfer of the goodwill of a business will vary from industry to industry and thus the non-competition obligations imposed on sellers of businesses will depend on the particular circumstances of each individual case and no universal rule can therefore be established as to the permissible duration of such clauses. Thus what may be regarded as a reasonable length of time for a non-competition clause in one case may be regarded as excessive in another. In its first decision, the Authority referred to the guidelines set out by the EU Commission in the Nutricia case where it indicated that among the factors to be taken into account in evaluating the duration of such clauses were:

27. In a large number of decisions, however, the Authority has taken the view that, as a general guide, a period of approximately two years will normally suffice if the sale involves only the transfer of good-will. The Authority remains of the view that a period of two years would be adequate to secure the transfer of goodwill in the vast majority of cases and that a longer period would, therefore, in the majority of cases restrict competition. A longer period of restraint may be justified in particular circumstances but such cases must be considered on their individual merits. The Authority considers that in the case of a sale of business, which involves a transfer of goodwill, but does not involve any transfer of technical know-how, a restriction on the vendor competing with the business for no more than two years does not contravene Section 4(1).

28. The geographical scope of a non-competition clause also has to be limited to the extent which is objectively necessary to achieve the aforementioned goal. As a rule, it should therefore only cover the markets where the products concerned were manufactured, purchased or sold by the vendor at the time of the agreement. A restriction on the vendor competing within such a defined area does not, in the Authority’s opinion contravene Section 4(1).

29. The restraint must also be limited in terms of subject matter. Specifically the restraint must apply only to the lines of business in which the vendor was previously engaged. Provided it is so limited such a restraint does not contravene Section 4(1).

30. In the Authority’s opinion restrictions on dealing with, or soliciting customers, employing or soliciting employees normally have the object and/or the effect of restricting a party from competing and hence they also constitute a restriction on competition contrary to Section 4(1). In the context of a sale of business agreement such restraints if they are limited, are not anti-competitive, but are merely ancillary to the main purpose of the agreement, which is to secure the transfer of the goodwill of the business. Thus such restraints do not, in the Authority’s opinion, contravene Section 4(1) provided that they are for a maximum period of two years, apply only to parties which have been customers of the firm at the time of the agreement or in the previous two years and apply only in respect of the business previously carried on by the vendor.

31. In general the Authority considers that restrictions on the use or disclosure of confidential information regarding the business are not anti-competitive and are merely designed to prevent the vendor using commercial information which is the property of the business being sold. A restriction on the use or disclosure of such information for an unlimited period of time would not normally, contravene Section 4(1). The exception would be where it could be shown that such a restraint would have the effect of preventing the vendor re-entering the market once a legitimate non-compete provision, as defined in para 27 above, had expired.

32. An unlimited restriction on the vendor using or disclosing confidential information is not acceptable, in the Authority’s opinion, where the information concerned consists of technical know-how. Where a degree of technical know-how is involved, it is clear that the vendor would be at a disadvantage in re-entering the market if he could not make use of such know-how and that an unlimited restriction on the use or disclosure of such know-how would be tantamount to an unlimited restriction on competing in the relevant market.

33. The Authority also gave its views on restrictions on use or disclosure of technical know-how in ACT/Kindle [9]. In particular it noted the views expressed by the EC Commission in Reuter/BASF that:

‘In no circumstances may an obligation to keep know-how secret from third parties, imposed on the transfer of an undertaking, be used to prevent the transferor, after the expiry of the reasonable term of a non-competition clause, from competing with the transferee by means of new and further developments of such know-how.'

‘To afford the purchaser unlimited protection against the use of technical know-how by the seller would, in the Authority's view, restrict competition since such an unlimited restriction would go beyond what is necessary to secure the complete transfer of the business to the purchaser. As in the Reuter/BASF case it appears reasonable to limit such protection to the time required to allow the purchaser to obtain full control of the undertaking. Once such a reasonable time has elapsed, however, the purchaser is no longer entitled to be protected against competition by the seller.'

34. The Authority also noted that the Commission stated in Reuter/BASF that:

‘It is further recognised that it may be necessary in certain cases to provide additional safeguards to ensure the effective performance of an agreement where technical knowledge, constituting an important part of the value of a transferred undertaking, is placed at the disposal of the transferee. As in the case of goodwill, it must be possible to prevent the transferor for a certain time from using such knowledge in a manner which would prevent the transferee from acquiring the undertaking with its market position undiminished.

Here too, the protection afforded to the transferee should be limited in time, since the transfer of legally unprotected know-how confers no exclusive rights on the purchaser. Contrary to the contention of BASF, the transfer of technical know-how in connection with the sale of an undertaking does not automatically preclude any further activity on the part of the seller based on such know-how. The opportunity of using know-how which is unknown to competitors is, like goodwill, a competitive advantage. This advantage can be diminished by the development by third party competitors of their own know-how. Unlike third parties the transferor of an undertaking remains aware of the contents of any transferred know-how, since he cannot divest himself of his own knowledge. For this reason it appears legitimate to protect the transferee in order for a certain time to enable him to acquire the undertaking with its competitive position undiminished. This need to protect the competitive position of the undertaking provides the justification for and prescribes the time limits to any non-competition clause involved.

In determining the duration of the non-competition clause, the factors particularly to be taken into account are the nature of the transferred know-how, the opportunities for its use and the knowledge possessed by the purchaser. It is also reasonable to assume that the transferee will actively exploit the assets transferred. A distinction must be made between know-how existing at the date of transfer and new or further developments by the transferor based on or in connection with the transferred know-how. A non-competition clause extending to new or further developments can be of shorter duration.'

35. The Commission clearly indicated that the transfer of technical know-how in connection with the sale of an undertaking does not automatically preclude any further activity on the part of the seller based on such know-how . In drawing a distinction between the know-how existing at the time of the sale and new or further developments of the know-how, it indicated that a longer non-compete clause could apply in respect of the existing know-how.

36. The Authority believes that a time limit of 5 years from completion of the sale of business is acceptable where technical know-how is involved. In the Authority’s opinion, technical know-how means a body of technical information that is secret, substantial and identified in an appropriate form. Know-how is only protected as long as it is secret. Thus there can be no justification for restricting a party using or disclosing know-how which is in the public domain. The Authority considers that the know-how must be substantial, as a lengthy period of protection following a sale of business is not justified for worthless and trivial know-how. The know-how must be ‘described or recorded’ in such a manner as to make it possible to verify that the first two conditions are fulfilled. For the avoidance of doubt the Authority does not consider that knowledge concerning a particular line of business can be regarded as constituting technical know-how. The Authority considers that in the context of a sale of business agreement, restrictions on the vendor competing with the business, soliciting customers or employees for up to five years do not contravene Section 4(1) where the sale of the business involves a transfer of technical know-how, i.e. a body of technical information that is secret, substantial and identified in an appropriate form.

37. It is common in some sale of business agreements for the vendor to remain engaged in the business as a shareholder, director or employee. In the Authority’s opinion, provided that such an arrangement is not an artificial construction designed to obtain a longer restraint on competition, a restriction on the vendor of the business competing with the business or soliciting customers of the business for the period during which he continues to be a shareholder, director and/or employee of the business does not contravene Section 4(1). Where the vendor remains only as a shareholder this would not apply if the share holding were a passive one, or where it was held for purely investment purposes. In particular the Authority does not believe that a restriction on competing with the business would be justified where the vendor retained less than 10% of the shares in the company and was not otherwise engaged in the firm whether as a director, employee or in any other capacity. Where the vendor held more than 10% of the shares in the business and subsequently disposes of his shares in the business the Authority is, of the opinion, that provided that they are for a maximum period of two years from the date of such sale, apply only to parties which have been customers of the firm at the time of the agreement or in the previous two years and apply only in respect of the business previously carried on by the vendor, a restriction on competing with the business and/or soliciting customers or employees does not contravene Section 4(1). Where the vendor of a business remains solely as a director or employee of the business a restriction on competing with the business following cessation of employment is, in the Authority’s opinion anti-competitive and contravenes Section 4(1). A restriction on soliciting customers of the business for up to one year after cessation of employment, does not, in the Authority’s opinion, contravene Section 4(1).

38. The Authority published a draft of the category certificate on 23 May 1997 and invited submissions from third parties. Only two submissions were received. The IBEC Competition Council stated that the issue of the certificate as proposed was to be very much welcomed. It suggested that the Authority only use a Herfindahl Hirschman Index threshold as this would make it easier for firms and their advisers to decide whether or not to notify a merger to the Authority. It also raised a query about the provision that where one of the parties to a merger had a market share of 35% the certificate would not apply. The submission also welcomed the provision of Article 2(d) and stated that IBEC fully endorsed it. It was submitted that this might mean that there would be few notifications. Finally it was suggested that the layout should be amended so as to make it more readily understandable to business. In particular it suggested that the Authority set out a white list and a black list of points that were and were not acceptable. The Department of Enterprise, Trade and Employment also welcomed the proposed certificate. It suggested that it should be pointed out that the certificate only represents the Authority’s approach to mergers under the Competition Act and in no way releases parties from their obligations under the Mergers Act.

39. The Authority notes the views expressed by the IBEC Competition Council. As stated the Authority recognises that many mergers take place for legitimate business reasons and do not pose any difficulties from a competition perspective. This certificate is designed to identify thresholds below which it can be safely assumed that a merger will not pose any competition problems and to reduce uncertainty and remove the need for parties to notify such agreements. The Authority intends to apply the HHI thresholds whenever possible. However, it believes that firms will not always have a very accurate idea of the HHI for the relevant market as this would require information about the market share of every firm in that market. Consequently an alternative measure, namely the four firm concentration ratio may also be used. The Authority remains of the view that where one of the firms already has a market share of 35% it would not be possible to state that the merger would have no effect on competition without an analysis of the relevant market. Consequently it believes that this threshold should be retained.

40. The Competition Authority has decided, in accordance with Section 4 of the Competition Act, 1991 as amended by Section 5 of the Competition (Amendment) Act, 1996 that, in its opinion, on the basis of the facts in its possession, agreements involving a merger and/or a sale of business, which satisfy the requirements of this category certificate, do not offend against Section 4 (1) of the Competition Act, 1991. Accordingly, the Competition Authority issues a certificate to the specified category of agreements, subject to the specified requirements of the category certificate. However, this in no way affects the requirement to notify mergers under the Mergers Act, 1978, as amended.

(a) Pursuant to Section 4 of the Competition Act, 1991 as amended by Section 5 of the Competition (Amendment) Act, 1996, the Competition Authority issues a category certificate to agreements between undertakings, decisions of associations of undertakings and concerted practices which involve a sale of business, including a merger or take-over and which satisfy the provisions of this certificate as set out below.

(b) A sale of business for the purposes of this certificate takes place when all, or a substantial part, of the assets, including goodwill, of an undertaking are acquired by another undertaking.

(c) A merger for the purposes of this certificate takes place when two or more undertakings at least one of which carries on business in the State, come under common control. Undertakings shall be deemed to be under common control if the decisions as to how or by whom each shall be managed can be made either by the same person, or by the same group of persons acting in concert.

(d) Without prejudice to (c) above, where one undertaking obtains the right in relation to another undertaking, which is a body corporate, to:

(i) appoint or remove a majority of its board or committee of management;

(ii) shares in it which carry 25% or more of the voting rights

the two undertakings shall be deemed to have come under common control.

(e) This certificate does not apply to the acquisition of some or all of the assets of an undertaking by a receiver, liquidator or examiner nor does it apply to an agreement between undertakings by which one makes a loan to the other with the result that it may obtain the right to appoint a receiver over the assets of that other on default.

(f) This category certificate is relevant to all mergers and sales of business without limitation as to the size or turnover of the undertakings involved.

(a) Where a merger or sale of business involves two or more undertakings which are competitors in one or more markets then, in the Authority’s opinion, such an agreement does not contravene Section 4(1) of the Competition Act, 1991, where, following the merger, the level of market concentration as measured by the Herfindahl Hirschman Index (HHI) is:

3. above 1800 but has increased by less than 50 points as a result of the merger.

(b) Alternatively where a merger or sale of business involves two or more undertakings which are competitors in one or more markets then, in the Authority’s opinion, such an agreement does not contravene Section 4(1) of the Competition Act, 1991, where following the merger, the combined market share of the four largest firms in terms of market share does not exceed 40% of the total relevant market.

(c) Where a merger or sale of business involves two or more undertakings which are competitors in one or more markets then, irrespective of the level of market concentration following the merger, in the Authority’s opinion, such an agreement could contravene Section 4(1) of the Competition Act, 1991, if it led to the creation or strengthening of a dominant position in a relevant market. For this reason where any one of the parties already has a market share of 35% or more this category certificate does not apply.

(d) Where a merger or sale of business involves two or more undertakings which are competitors in one or more markets then, irrespective of the level of market concentration following the merger, in the Authority’s opinion, such an agreement does not contravene Section 4(1) of the Competition Act, 1991, unless it can be shown that there are barriers which would prevent other firms entering the market or that there is little prospect for purchasers of the products concerned to obtain supplies from outside of the State.

(a) This certificate shall not apply to a merger or sale of business agreement which involves a post-sale restriction on the vendors competing with the purchaser unless the agreements includes the sale of the goodwill of the business and the restriction on the vendor competing, soliciting customers, soliciting employees and/or doing any other things in competition with the purchaser does not:

(b) Notwithstanding the provisions contained in (a) above the certificate shall apply to a merger or sale of business agreement which involves a post-sale restriction on the vendors competing with the purchaser, soliciting customers or employees for up to a maximum of five years from the date of completion where the business involves the use of technical know-how, defined as a body of technical information that is secret, substantial and identified in an appropriate form. The restriction must cease to apply once such know-how is in the public domain. For the avoidance of doubt knowledge concerning a particular line of business does not constitute technical know-how for the purpose of this provision.

(c) This certificate shall apply to agreements which include restrictions on the vendor using or disclosing confidential information regarding the business for an unlimited period of time. The certificate shall not apply where the agreement includes a restriction on the vendor using or disclosing technical know-how as defined in (b) above for a period exceeding five years.

(a) This certificate shall apply where, following completion, the vendor remains engaged in the business as a shareholder, director or employee and is prevented from competing with the business, soliciting customers and/or employees of the business for so long as s/he remains engaged in the business whether as a shareholder, director or employee.

(b) This certificate shall also apply where a vendor, who has retained a share holding of not less than 10% in the business following completion of the sale agreement, is prevented from competing with the business, soliciting customers and/or employees of the business for a period of up to two years from the date of any future sale of such shares.

[1] See, for example, Competition Authority decision no. 6, Woodchester Bank Ltd./UDT Bank Ltd., 4 August 1992.

[2] Competition Authority decision no. 1, 2 April 1992.

[3] Competition Authority decision no. 9, 14 September 1992.

[4] Competition Authority decision no. 8, 4 September 1992.

[5] Competition Authority decision no. 12, 29 January 1993.

[6] For the avoidance of doubt all references to mergers hereafter refer only to mergers which are the result of an agreement between undertakings, a decision of an association of undertakings or a concerted practice.

[7] By definition a merger involving potential competitors will have no impact on market concentration, since the potential competitor will have a zero market share.

[8] US Department of Justice Merger Guidelines, 1984, para 3.45.

[9] Competition Authority decision no. 8, 4 September 1992 .