9.
Consolidations by Facilities-based Licensees That Are Likely to Unreasonably Restrict Competition
Introduction
9.1.
Application
9.1.1.This section applies only to Facilities-based Licensees. In this section, the term “Licensee” refers to Facilities-based Licensees.
Over-view
9.1.2.In competitive markets, enterprises often seek to merge with, acquire or otherwise consolidate with other enterprises (“Consolidation”). In many cases, such combinations can have pro-competitive effects, such as creating economies of scale and scope. In other cases, however, such consolidations may harm competition. For example, such transactions could create an entity that is not subject to competitive market forces or could facilitate unlawful collusion amongst competing entities. All Facilities-based licences granted by IDA require the Licensee to obtain prior approval from IDA before assigning the licence or before changes on ownership, shareholding or management of a Licensee. In reviewing requests to assign a licence or change the ownership, shareholding or management of a Licensee in connection with a Consolidation, IDA will assess the likely impact of the proposed Consolidation on competition. Where IDA believes that a transaction risks unreasonably restricting competition, IDA will reject the request or will impose appropriate conditions. The provisions of this section do not limit the ability of IDA to condition or prohibit the assignment of a licence or changes in ownership, shareholders or management of a Licensee for other reasons, where IDA concludes that such action is in the public interest.
Duty of All Licensees to Obtain IDA Approval
9.2.Each Licensee, in accordance with the requirement of its licence, must obtain the prior approval of IDA before engaging in either of the following transactions:
Assignments of a Licence
9.2.1.A Licensee must receive the written approval of IDA before assigning, transferring, subletting or otherwise disposing its rights, duties, liabilities, obligations and privileges under its licence to any other entity. For example, if Company A holds a licence, and its assets are to be acquired by Company B, Company A must obtain IDA’s written approval before it assigns its licence to Company B.
Change in Ownership, Shareholding or Management of a Licensee
9.2.2.A Licensee must receive the written approval of IDA before implementing any change in ownership, shareholding or management of the Licensee. For example, if Company B holds a licence, and if Company B is a wholly-owned subsidiary of Company A, and if Company C proposes to acquire Company A, Company B must obtain IDA’s prior written approval even though it will remain the Licensee because there will be an indirect change in ownership.
Standard for Approval
9.3.IDA will not approve a request to assign a Licence or allow a change in ownership, shareholding or management of a Licensee in connection with a proposed Consolidation where IDA determines that the proposed Consolidation is likely to unreasonably restrict competition in any market in which the Licensee competes.
Procedures
9.4.Any Licensee that seeks to enter into any Consolidation that will require IDA’s approval for the reasons specified in subsections 9.2.1 or 9.2.2 of this Code must submit a request to IDA explaining the nature and purpose of the Consolidation and demonstrating that the proposed Consolidation will not unreasonably restrict competition. The Licensee must also submit a copy of any proposed agreement in connection with the proposed Consolidation. The Licensee bears the burden of providing information that will enable IDA to assess the likely competitive impact of the proposed Consolidation. This may include information regarding: the relevant markets; the market participants; the level of concentration in the market; the structure of the market (and the extent to which it facilitates concerted action by multiple participants); the likelihood that output would be increased (either by existing market participants of new entrants) in response to significant and non-transitory price increase; the likelihood of End User switching in response to a significant and non-transitory price increase; and the likely efficiencies that would result from the proposed Consolidation. Where appropriate, IDA will request additional information, and will seek comments from interested persons. Parties may request confidential treatment of information submitted to IDA. IDA ordinarily will issue a decision indicating whether it approves, rejects or approves subject to conditions the request within 30 days. IDA may, however, extend this period by up to 90 days in the case of a proposed Consolidation that raises novel or complex issues.
Action by IDA
9.5.At the conclusion of its review, IDA will take one of the following actions:
Grant of the Application
9.5.1.IDA may grant the application in full.
Denial of the Application
9.5.2.IDA may deny the application and if IDA does so, IDA will provide a written statement of the reasons for its denial.
Grant of the Application, Subject to Conditions
9.5.3.IDA may grant the application, subject to conditions designed to reduce any anti-competitive harm. Where IDA imposes conditions, the Licensee filing the application will have 14 days from the date of IDA’s decision to notify IDA as to whether it accepts the conditions or wishes to withdraw its application. Conditions that IDA may impose include:
Non-discrimination Requirements
9.5.3.1.As a condition of approval, IDA may require the Licensee to provide access to infrastructure, information or services to other Licensees, other entities or End Users on a non-discriminatory basis. IDA may require the Licensee to contract for independent audits to confirm compliance or to certify periodically its compliance.
Accounting Separation
9.5.3.2.As a condition of approval, IDA may require the Licensee to account separately for revenues from operations that are subject to effective competition and operations that are not subject to effective competition, and to comply with rules governing allocation of joint costs and transactions between affiliates, in order to deter cross-subsidisation. IDA may also require the Licensee to contract for independent audits to confirm compliance or to certify periodically its compliance.
Structural Separation
9.5.3.3.As a condition of approval, IDA may require the Licensee to establish structurally separate affiliates, which may be required to have separate books of account, separate facilities, separate officers, separate personnel, separate credit lines, and/or other appropriate forms of separation.
Partial Divestiture
9.5.3.4.As a condition of approval, IDA may require the Licensee to divest certain assets to a third party, in an arm’s length transaction.
Other Pro-competitive Conditions
9.5.3.5.IDA may impose other conditions on approval of the application that are designed to increase competition. This includes conditions designed to increase entry into markets that are not yet fully competitive.