The Competition Act, 2002

On the 10th April 2002 the Competition Act, 2002 (the Act) became law. On the 13th May 2002 the Minister for Enterprise Trade and Employment signed the Commencement Order.

As and from the 1st July 2002, Part 1, Part 2 (except for Sections 4(8), 5(3), 6(4)(c) and 10), Part 4, Part 5 (except for Section 48(b)), Schedules 1 and 2 (except for paragraph 4 thereof) and Schedule 3 come into operation.

As and from the 1st January 2003, the remaining Sections of the Act will come into full force and effect, except for two provisions, namely Section 6(4)(c) and Section 10, the commencement of which has been deferred for now, pending the formal adoption of a new EU Regulation on the application of Articles 81 and 82 of the Treaty and to allow for necessary administrative arrangements to be put in place.

In simple terms, the Act updates existing competition and mergers legislation and when fully implemented, will repeal, amongst other pieces of legislation, the following; the Mergers Takeovers and Monopolies (Control) Act, 1978, the Competition Act, 1991 and the Competition (Amendment) Act, 1996.

Competition Rules and Enforcement

Section 4 provides that all agreements, decisions 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" unless it complies with certain conditions laid out in Section 4(5) or falls into a category of agreements, decisions or concerted practices, the subject of a declaration for the time being in force under Section 4(3).

Section 4(5) contains one of the saving provisions and governs agreements, decisions or practices which would otherwise be unlawful, but which "having regard to all relevant market conditions", contribute to improving the production or distribution of goods or to the provision of services or to the promoting of technical or economic progress, while allowing consumers a fair share of the resulting benefits.

Effectively, the previous practice of issuing what were known as "Category Licences" by the Competition Authority will be done away with. This reform is analogous to the approach taken under EU Competition Law by means of what are termed Block Exemptions. However, the Competition Authority will still be able to issue Category Licences in certain circumstances.

Section 5 of the Act prohibits the abuse of a dominant position.

Breaches of Section 4 (anti-competitive agreements, decisions and concerted practices) or Section 5 (abuse of dominant position) will constitute an offence under the provisions of Sections 6 and 7 of the Act.

Section 8 sets out the penalties and proceedings for offences under Sections 6 and 7 and provides for fines in certain circumstances not exceeding the greater of €4,000,000 or 10% of turnover in the financial year ending in the 12 months prior to conviction, or in the case of an individual, to a fine not exceeding €4,000,000 or 10% of the turnover of the individual for the financial year ending in the 12 months prior to conviction, or to imprisonment for a term not exceeding 5 years, or both.

Section 14 provides that any party, who is harmed because of a breach of Section 4 or Section 5 of the Act, has a right of action for breach of the competition rules. Remedies include relief by way of injunction or damages including exemplary damages.

Mergers and Acquisitions

Section 16 deals with mergers or acquisitions and imports largely from the EC Merger Regulations. The critical test is one of "control", which is essentially the ability to exercise "decisive influence".

Section 18 provides a turnover threshold in the case of mergers or acquisitions where at least two or more of the undertakings involved, has a world-wide turnover of €40,000,000 or more, where two or more of the undertakings carries on business on the island of Ireland and where the turnover within the State of any one of the undertakings concerned, is not less than €40,000,000 or where the provisions of Section 18(5) apply i.e., the exigencies of the common good test.

Section 20 empowers the Competition Authority to "enter into discussions with the undertakings involved in the merger or acquisition or with any individual or other undertakings" in respect of any notification received by it "with a view to identifying measures which would ameliorate the effects of the merger or acquisition on competition in markets for goods or services", so as to "form a view as to what would substantially lessen competition in markets for goods or services".

Sections 21 and 22 set out the procedures for investigating mergers and the time frames for reaching decisions. Section 23 introduces specific provisions with regard to media mergers. Section 24 sets out the procedures for appeals to the High Court against determinations of the Competition Authority.

The Competition Authority

The Act provides that the Competition Authority shall be a body corporate with perpetual succession and sets out its functions, investigatory powers and obligations.

Section 45 provides that the Competition Authority may appoint "authorised officers" for the purpose of the Act. Authorised officers, in the exercise of their duties, have the following powers:-

• The right to enter and search premises or vehicles.
• The right to enter and search any dwelling occupied by a director, manager or any staff member of the undertaking concerned, where reasonable grounds exist to believe that records relevant to the investigation are being kept.
• To seize and retain any books, documents and records relating to the activities under investigation.
• To require that any person employed by the undertaking under investigation gives to the authorised officer his or name, home address and occupation, and to provide to the authorised officer, any books, documents or records relating to the activity being investigated under their power or control.
• To inspect, copy and take extracts from such books, documents and records.
• To require any person employed by the undertaking in question, to give to the authorised officer, any information that they may require.
• To require any such person to give to the authorised officer, any other information which the authorised officer may reasonably require in connection with the entry and search of the premises or vehicle in question.

It is an offence to obstruct or impede the work of the authorised officer.

Section 47 provides the authorisation for the Director of Corporate Enforcement, the Garda Siochana or "such other person as may be prescribed" by the Minister, to relate information to the Competition Authority or the authorised officer in relation to the alleged commission of an offence under the Act.

Section 50 of the Act provides substantial protection for persons reporting alleged breaches of the Act to the Competition Authority. This section will effectively grant immunity to persons who inform the Competition Authority of suspected breaches and operates unless it can be proved that the informant "has not acted reasonably and in good faith" in forming the opinion and communicating it to the Competition Authority.

Employers may not penalise employees who have made such information available to the Competition Authority. However, it shall be an offence under this section for any person to communicate information which it knows to be false or misleading.

For further information or general enquiries contact:-
Anthony Layng
E-mail: alayng@kilroys.ie
Telephone: +353-1-439 5600
Fax: +353-1-439 5601 / 4395602

© Kilroys Solicitors May 2002