The Impact of Merger Controls in Business

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Merger control is an instrument of the competition law, which seeks to prevent substantial interference with the free and unfettered competition from over-concentration of corporate power.

Merger control rules exist in many countries around the world, and is particularly important in markets that are already significantly concentrated.

Merger control regimes are taken up to avoid anti-competitive effects of concentrations. Consequently, the majority of merger control regimens render a number of substantive tests.

The impact of merger control in the economy may be difficult to estimate. The most common route for firms to join forces is through company purchase, in which a company takes over the majority shares and voting rights in another company through the acquisition of assets.

And these can either represent an entire business or part of it (e.g, a subsidiary). While some may form of joint ventures between two or more previously independent companies.

In addition, concentrations of corporate power can also take effect via more subtle, less transparent measures that involve a firm being handed the right to occupy the majority composition of membership on a governing body, and thus indirectly determine the business policies.

Modern merger control regimes are usually of an ex-ante nature, which means that the antitrust authority must anticipate the anti-competitive consequence of a concentration. At the same time, a concentration could easily result in a decline in output and lead to higher prices. In such circumstances, the antitrust authority has to apply respective economic theories and rules in a legally binding process.

In some countries, an association of companies must be registered with the authorities, in the event that the parties have reached a specific total turnover. A number of countries in the world – including all the major developed nations, have a private right of merger control, this is true for all European Union members except Luxembourg.

Almost all legal systems ascertain whether a specific concentration transaction is subject to merger control, depending on the applicable criteria. Minimum requirements are set in such a way that factors such as the economic importance of a particular merger are taken into consideration using the so-called thresholds. These are obviously used to weed out non-critical concentrations with identified anti-competitive potential.

The common and widespread practice especially in Western Europe in countries such as Germany, Austria, Netherlands, France, Belgium, etc, is to establish the thresholds against the annual turnover of the companies involved. Advantage of these criteria is that the parties can find out relatively easily and reliably whether their project is subject to control or not.  Also common, although to a lesser extent, is a connection with the exclusive or even the market share of the company (eg UK, Spain, etc).



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