Guilty plea in Ireland’s first criminal prosecution involving “gun-jumping” in a merger
April 9, 2019
On 8 April 2019, Armalou Holdings Limited pleaded guilty in Dublin Metropolitan District Court to illegally putting into effect a business merger without first obtaining the necessary regulatory approval. Under Irish competition law, mergers or acquisitions, which reach certain financial thresholds in the State, must be notified to the Competition and Consumer Protection Commission (CCPC). Failure to notify such a merger or acquisition is referred to as “gun-jumping”, which is a criminal offence under Irish law and the transaction is deemed void. This can arise where merging parties either:
(i) fail to notify a notifiable transaction, before putting it into effect or;
(ii) notify such a transaction but begin to put it into effect before obtaining clearance from the CCPC.
This was the first criminal prosecution taken for gun-jumping in the Irish State.
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 (Armalou Holdings), through its wholly-owned subsidiary, Spirit Ford Limited. After an extensive investigation involving the gathering of a significant amount of documentation and analysis, the CCPC referred a file to the Director of Public Prosecutions concerning the parties’ conduct for failing to notify a notifiable transaction before putting it into effect.
Armalou Holdings pleaded guilty to six charges arising out of its failure to notify the CCPC of the transaction prior to putting it into effect on 3 December 2015. Judge Halpin was satisfied that Armalou Holdings was unaware of its obligations and that it was not a wilful breach of the law, and indicated that, in those circumstances, he would apply the Probation Act 1907 if Armalou Holdings made a charitable donation of €2,000 to a specified charity. Airfield Villas Limited (formerly known as Lillis-O’Donnell Motor Company Limited), a co-accused, was granted an adjournment until Friday 3 May 2019.
Speaking about today’s hearing, Isolde Goggin, Chairperson of the Competition and Consumer Protection Commission said;
“The CCPC’s role is to assess mergers and acquisitions in advance to determine whether a transaction could significantly lessen competition in the relevant markets. Where a proposed merger or acquisition requiring notification is put into effect, without submitting a notification to the CCPC, that merger is void. If transactions are allowed to progress without the CCPC’s approval, there is considerable potential for irreparable harm to be done to the market and therefore to consumers and this could lead to higher prices and less choice. For this reason the merger regime in Ireland is extremely important.
Last year the CCPC continued to monitor compliance with merger notification requirements. Today’s hearing is a strong reminder to businesses and legal practitioners, that failing to notify a notifiable transaction is a criminal offence and it is essential that merging parties comply.”
- In August 2017, the CCPC was informed that Armalou Holdings Limited, through its subsidiary Spirit Ford Limited, may have acquired Lillis O’Donnell Motor Company Limited without first notifying the acquisition to the CCPC.
- Section 18(1) of the Competition Act 2002 (the Act) requires that proposed mergers or acquisitions between businesses operating in the State, which meet certain turnover thresholds, must be notified to the CCPC.
- Under section 19(1) of the Act, any proposed merger or acquisition that is required to be notified to the CCPC shall not be put into effect until the CCPC has made a determination in relation to such merger or acquisition. If a proposed merger or acquisition is put into effect in contravention of section 19(1) of the Act, such a merger or acquisition is void under section 19(2) of the Act.
- The CCPC commenced an investigation in October 2017 into the suspected breach of the notification requirements under section 18(1) of the Act, which is an offence under section 18(9) of the Act.
- Merging parties found guilty can be subject to fines of up to €3,000 (on summary conviction) and €250,000 (on conviction on indictment) and in addition daily fines for each subsequent day the transaction is not notified may be applied.
- On 9 February 2018, the acquisition by Armalou Holdings Limited, through its wholly-owned subsidiary, Spirit Ford Limited, of Lillis-O’Donnell Motor Company Limited was notified to the CCPC. The acquisition was put into effect in December 2015 without first being notified to the CCPC. The CCPC accepted the notification and proceeded to review the notification in accordance with the relevant provisions of the Act. Subsequently the transaction was cleared on 23 March 2018.