THE Competition Authority has published a draft list of the conditions companies must meet if they want an automatic approval for a merger or buyout.

Under new legislation, the body need no longer issue individual approvals for companies, but can use "category certificates".

Industry analysts said last night the move reasserted the authority's right to rule on mergers and acquisitions, but also acknowledged that the vast majority of such deals do not impact on competitiveness.

Interested parties who wish to suggest changes to the proposed conditions have two months to make submissions to the authority.

Under the new rules, a merger or buyout receives a category certificate "unless the level of market concentration following the merger is relatively high".

"The combined,market share of the four biggest firms should be 40 per cent or less," a spokesman for the authority said.

An exception to this rule comes into play if one of the firms in the acquisition already controls 35 per cent of the market.

Even if the four biggest firms have a market share of more than 40 per cent, the spokesman added, a company is entitled to a category certificate if there are no significant barriers to entry.

Also, still presuming that the four largest companies have a market share exceeding 40 per cent, a merger or acquisition will receive a certificate "if there is a reasonable prospect that they could face competition from imports", the authority said.

The certificate also accepts the widespread practice of including a "noncompete" provision in merger and buyout agreements - which prevents a seller from establishing a competing business for a set time period - but will set a limit on such agreements.

In the case of a standard business, the seller can be obliged to refrain from competing for a maximum of two years, the authority said. For a business that involves significant and secret technical knowledge or know how, the maximum period that a seller can be prevented from competing is extended to five years.

In order to receive the category/certificate, the noncompete agreement must also be confined to the geographical area in which the business operates, the authority said.

Under the Competition Act 1996, the authority is allowed to issue certificates for categories of, agreements which, in its opinion, do not contravene the law.