Higher penalties on the cards for failing to notify mergers
10 April 2019
When faced with legislation that requires parties to take certain steps or prevents them from implementing a particular course of action, the questions often asked include "what are the consequences and who will be liable to pay?" There has for a long time been uncertainty about the penalty firms would face if they fail to notify a merger and/or implement a merger without the requisite approval of the competition authorities.
The Competition Commission has now sought to provide some guidance by publishing Guidelines for the determination of administrative penalties for failure to notify mergers and implementation of mergers contrary to the Competition Act. The Guidelines (which became effective on 1 April 2019) could lead to higher penalties for failure to notify mergers or prior implementation.
The Act requires parties to any transaction that meets the definition of a "merger" to notify such transaction to the Commission. The parties may not implement such transaction until approved by the Commission or the Competition Tribunal, as the case may be. The Guidelines provide a list of conduct that the Commission may deem as prior implementation.
This includes the acquiring firm changing the name of the target firm (if this amounts to material influence in the Commission's view), integrating the parties' operations, the parties marketing themselves as a single entity (including in interactions with customers) and the acquiring firm appointing directors to the board of the target firm or influencing strategic decision making, prior to the approval of the competition authorities.