Lecture Week 8
Merger control
Merger control
Merger control is one of the pillars of European competton law. Merger and acquisitons
are booming business. It is a growing business, especially in the tech-markets.
Background & basics
- Basic idea: prevent undertakings from gaining a dominant positon by taking over
other undertakings
o Art. 101 and 102 TFEU are not efectve for mergers, because they would only
be efectve afer the damage has occurred exep post-.
o Rules on mergers are controlled by the Merger Regulaton, it is not laid down
in the Treaty
It provides for a noticaton procedure. There is an ep-ante control.
This means that the Commission has far reaching powers, they can
already do something before something happened. The threshold of
the ECJ are high for the Commission, the Commission really needs
good and much evidence that something might happen.
- Problematc idea?
o Companies can grow big, by being the best -> this is good
o There is a special responsibility for dominant companies -> abuse is bad
It becomes bad or problematc because it might lead to abuse of
dominant positons and lower consumer welfare.
o Growth by take-over and mergers & acquisitons
Why would this be bad?
Not all mergers are bad
Mergers dangerous to competton are bad
Creatng a exvery- big company at one go
o Big companies have no real compettors
o This leads to lower consumer welfare
Types of merger
, - If merger control aim is to prevent eliminaton of competton through mergers &
acquisitons. Then:
o Horizontal mergers are to be looked at critcally
o But: are vertcal & conglomerate mergers bad for competton?
- However: EU policy choice: all types of mergers are scrutnized
o It does not mater which type of merger it is, they all fall under the scope of
the Merger Regulaton.
Horizontal merger
For epample: merger between Airtours and First Choice. Two companies actve on the
market on package holidays. These companies in the UK merged into one. The Commission
thought it would be problematc. This is horizontal merger; two companies providing
package holidays merging into one.
Vertical merger
For epample: Walt Disney taking over Pipar. Pipar was producer of 3D animaton ilms. Walt
Disney did not do 3D ilms. There was a contract between Walt Disney and Pipar. In 1991
Disney did not see a future in 3D movies. Pipar had the power to change the contract in their
favor, something Disney did not like. Disney was larger than Pipar, Disney bought Pipar to
prevent them from changing the contract.
Conglomerate merger
For epample: CASE General electric and Honeywell. There are various markets and various
product. Both companies were actve in the area of aviaton.
Facebook-WhatsApp merger
Both of them are actve in the communicatons ield. They are both apps for smartphones.
The European Commission distnguishes between three diferent markets: consumer
communicatons services, social networking services and online advertsing services. It would
be a horizontal merger.
Merger control steps
- Three steps:
1. Is there a concentraton?
a. Look at the Merger Regulaton to answer this queston
2. Does it have a community exEU- dimension?
3. Is it allowed?
a. Is there a signiicant impact on economic competton exSIEC-?
b. If that is the case, is there a defense or remedy possible?
- Primary source: Merger Regulaton exand case law-
- Secondary sources: many regulatons and policy documents in which the Commission
further epplains the Regulaton.
1. Is there a concentration?
- Art. 3ex1- and 3ex2- of the Merger Regulaton: there has to be a change of control
o A change of control generally happens through ownership and shareholder
rights.
Merger control
Merger control
Merger control is one of the pillars of European competton law. Merger and acquisitons
are booming business. It is a growing business, especially in the tech-markets.
Background & basics
- Basic idea: prevent undertakings from gaining a dominant positon by taking over
other undertakings
o Art. 101 and 102 TFEU are not efectve for mergers, because they would only
be efectve afer the damage has occurred exep post-.
o Rules on mergers are controlled by the Merger Regulaton, it is not laid down
in the Treaty
It provides for a noticaton procedure. There is an ep-ante control.
This means that the Commission has far reaching powers, they can
already do something before something happened. The threshold of
the ECJ are high for the Commission, the Commission really needs
good and much evidence that something might happen.
- Problematc idea?
o Companies can grow big, by being the best -> this is good
o There is a special responsibility for dominant companies -> abuse is bad
It becomes bad or problematc because it might lead to abuse of
dominant positons and lower consumer welfare.
o Growth by take-over and mergers & acquisitons
Why would this be bad?
Not all mergers are bad
Mergers dangerous to competton are bad
Creatng a exvery- big company at one go
o Big companies have no real compettors
o This leads to lower consumer welfare
Types of merger
, - If merger control aim is to prevent eliminaton of competton through mergers &
acquisitons. Then:
o Horizontal mergers are to be looked at critcally
o But: are vertcal & conglomerate mergers bad for competton?
- However: EU policy choice: all types of mergers are scrutnized
o It does not mater which type of merger it is, they all fall under the scope of
the Merger Regulaton.
Horizontal merger
For epample: merger between Airtours and First Choice. Two companies actve on the
market on package holidays. These companies in the UK merged into one. The Commission
thought it would be problematc. This is horizontal merger; two companies providing
package holidays merging into one.
Vertical merger
For epample: Walt Disney taking over Pipar. Pipar was producer of 3D animaton ilms. Walt
Disney did not do 3D ilms. There was a contract between Walt Disney and Pipar. In 1991
Disney did not see a future in 3D movies. Pipar had the power to change the contract in their
favor, something Disney did not like. Disney was larger than Pipar, Disney bought Pipar to
prevent them from changing the contract.
Conglomerate merger
For epample: CASE General electric and Honeywell. There are various markets and various
product. Both companies were actve in the area of aviaton.
Facebook-WhatsApp merger
Both of them are actve in the communicatons ield. They are both apps for smartphones.
The European Commission distnguishes between three diferent markets: consumer
communicatons services, social networking services and online advertsing services. It would
be a horizontal merger.
Merger control steps
- Three steps:
1. Is there a concentraton?
a. Look at the Merger Regulaton to answer this queston
2. Does it have a community exEU- dimension?
3. Is it allowed?
a. Is there a signiicant impact on economic competton exSIEC-?
b. If that is the case, is there a defense or remedy possible?
- Primary source: Merger Regulaton exand case law-
- Secondary sources: many regulatons and policy documents in which the Commission
further epplains the Regulaton.
1. Is there a concentration?
- Art. 3ex1- and 3ex2- of the Merger Regulaton: there has to be a change of control
o A change of control generally happens through ownership and shareholder
rights.
