Merger control

In simple terms, the creation of a dominant position would usually result in a substantial lessening of or significant impediment to effective competition.

The large majority of modern merger control regimes are of an ex-ante nature, i.e. the reviewing authorities carry out their assessment before the transaction is implemented.

While it is indisputable that a concentration may lead to a reduction in output and result in higher prices and thus in a welfare loss to consumers, the antitrust authority faces the challenge of applying various economic theories and rules in a legally binding procedure.

[1] A horizontal merger is one between parties that are competitors at the same level of production and/or distribution of a good or service, i.e., in the same relevant market.

This was a controversial area with which competition authorities and courts have struggled to come to terms over the years, but experience has led to the emergence of some agreement on what conditions are most likely to give rise to coordinated effects.

[7] Under the European Union merger control regime, in order for coordinated effects to arise the so-called "Airtours criteria" have to be fulfilled.

Vertical mergers have significant potential to create efficiencies largely because the upstream and downstream products or services complement each other.

However, it should be stressed that in these cases there is a real risk of foregoing efficiency gains that benefits consumer welfare and thus the theory of competitive harm needs to be supported by substantial evidence.

Mandatory regimes normally also contain a so-called "suspensory clause", which implies that the parties to a transaction are indefinitely prevented from closing the deal until they have received merger clearance.

This creates obstacles for the parties to a concentration to close a transaction until a number of the regulatory clearances required are obtained.

However, the Competition and Markets Authority can request the parties to a merger that has already completed to hold the two businesses separate pending an investigation (so called "initial enforcement orders").

Mandatory regimes can be considered effective in preventing anticompetitive concentrations since it is almost impossible to unravel a merger once it has been implemented (for example because key staff have been made redundant, assets have been sold and information has been exchanged).