A look at a merger and merger control.
EU perspective for merger control, all relevant defences, the assessment on mergers and the substantial test is considered.
Merger Control
Merger:
A non-technical term denoting amalgamation or joining of two or
more frms into an existing frm or to form a new frm.
Terms used: merger, acquisition, takeover, concentration, etc.
Includes both ‘recommended’ as well as ‘hostile’ takeovers.
Merger control is a political area, due to divergent beliefs as to the
merits of mergers + contrasting analyses of the likely economic outcomes
of proposed individual merger arrangements.
Merger connotes a welcome, uncontested, union but it applies equally
to hostile takeover.
Can cover a full legal merger.
Concerns over the competitive consequences of mergers.
Horizontal mergers mergers between undertakings which are actual
or potential competitors on the same relevant market the
greatest concern from the competition law perspective
Vertical mergers mergers involving companies operating at
different levels of the suppl chain. Eg, when a manufacturer of a
certain product (the ‘upstream frmm’ merges with one of its distributors
(the ‘downstream frmm’
Conglomerate mergers mergers between frms that are in a
relationship which is neither horizontal nor vertical.
Primary beneft a merger can bring is to improve the efcienc of the
companies involved, particularly economies of scale. Efficiency can also
be enhanced by better management or easier access to capital.
Other benefts include the possibility of frm facing closure thereb
extending its life + reducing concerns regarding unemployment.
Most signifcant against mergers, the most signifcant argument concerns
potential reduction in competition. Wider concerns raided which may
justif intervention b national + supra-national competition
authorities. Concerns include objections as to the size + power of
the merged frm, the possible detrimental efect of the merger on the
balance of payments + transfer of control of a company into foreign
ownerships.
Two schools of thoughts:
o First would advocate intervention onl if the proposed merger
is likel to have an adverse effect on competition in a market,
otherwise merger decisions should be left in the capable hands of
entrepreneurs and shareholders.
o Second approach believes a more interventionist stance is
required because mergers have often not ielded the
benefts anticipated by their advocates and have wide-ranging
potential societal repercussions.
Histor of Merger Control in EU:
• No specifc provisions for merger control in the Treat of Rome
(1957).
• Until 1989 no specifc rules at the EU level.
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