Merger Control Regulation Research Articles

Merger remedies in the era of the Digital Markets Act (DMA): the impact of the DMA on the EU Merger Control Regulation (EUMR) in designing commitments

ABSTRACT The Digital Markets Act (DMA) and the EU Merger Control Regulation (EUMR) are complementary tools that could apply concurrently to mergers involving gatekeepers. Yet, potential tensions between the DMA and the EUMR have been unexplored. It is this paper's objective to shed light on the interplay between the EUMR and the DMA, in the context of commitments design for gatekeeper acquisitions. This paper argues that the DMA could influence the EUMR in designing remedies, since these tools may be taking a similar approach to addressing the harmful effects of gatekeepers’ practices. Accordingly, the new DMA obligations could impact future commitments design under the EUMR in two ways. First, at the theory of harm stage, because of the DMA's deterrent effect. Second, at the remedy design stage, because of the principle of proportionality. Therefore, the DMA could restrict the EUMR's power to design merger commitments, in the context of gatekeeper acquisitions.

Structure and Enforcement of the SIEC Test – Analyzing the CK Telecoms Judgment of the Court of Justice

Abstract The Court of Justice in its judgment of 13 July 2023 in CK Telecoms has dealt with important questions about the construal and the enforcement of the SIEC test. The decision had been awaited eagerly, since it was the first case in which the Luxembourg courts decided on the direct application of the SIEC criterion outside the scope of the notion of market dominance since the entering into force of the new EU Merger Control Regulation (EUMR) in 2004. Core issues are the burden of proof and the standard of proof, the definition of certain theories of harm, as well as the dealings with efficiencies. The following article analyzes the judgment and draws general conclusions on doctrines behind the SIEC test.

When should EU merger assessment address privacy? The conditions for addressing privacy issues under the EU merger control regulation

ABSTRACT The advent of digital companies has brought benefits to society. Nevertheless, the digital era poses significant risks to consumers’ privacy. The combination, through mergers, of enormous datasets could raise further privacy concerns. It has been much discussed whether and how consumer privacy concerns should be introduced within merger assessment. This paper approaches this issue from another perspective and reflects upon the circumstances under which the EU Merger Control Regulation (EUMR) has a role to address privacy issues. Accordingly, this paper clarifies the conditions that must be satisfied in order for privacy issues to fall within the EUMR’s ambit. First, privacy should be a parameter of competition on the market and second, there must be a causal link between the merger and privacy deterioration. Following this, the paper turns to critically analyse the Commission’s treatment of privacy issues in objectively selected mergers involving some of the most powerful digital companies.

The merger control regulation: What’s past is prologue

The merger control regulation: What’s past is prologue

KILLER ACQUISITIONS AND COMPETITION LAW: IS THERE A GAP AND HOW SHOULD IT BE FILLED

In innovation-driven budding markets, there is a high likelihood of ‘killer acquisitions’. Killer acquisitions stifle potential competition where an established player eliminates an innovative new product or removes the potential competitor entirely in its nascent stage. An established, and often cash-rich, large entity’s fear of an innovative competitor undermining its market position incentivises it to make an acquisition with the intent to eliminate future competition. Many jurisdictions, such as India, lack adequate merger control regulations to restrain such acquisitions. This article highlights jurisdictional and substantive gaps which allows killer acquisitions to escape scrutiny. Jurisdictional gaps emerge when the threshold for scrutiny is based on turnover or asset value of the parties involved.Startups and new companies having negligible turnovers escape the regulatory radar when acquired by a large player. Substantively, merger controls are based on the potential merger’s impact on competition in the relevant market, whichis difficult to assess in the case of early-stage start-ups where products are at a nascent stage. Instances of under-enforcement of competition law in cases of killer acquisitions are common, as the new company’s potential is underestimated. Such under-enforcement may not be systemic in most jurisdictions, but poses a serious concern with consequences bordering on monopolisation in certain markets.

Implications of the Digital Economy on Merger Control in Pakistan and China: Policy Implications for Pakistan

The rise of the digital economy has challenged the foundation of competition law frameworks the world over. Today, the antitrust doctrine finds itself confronting a new economy; an econo-my wherein data acts as a currency, markets are without prices, market collisions are based on algorithms, and the market is ‘infinite’. Several jurisdictions such as Germany, Austria, and China have developed new regulations or amended existing legislations to confront the chal-lenges presented by the digital economy. A dearth of theoretical and empirical literature has evaluated whether digital markets are so fundamentally different as to require a different set of rules. Of specific interest to this paper is whether current competition rules are sufficient to deal with mergers and acquisitions (M&As) in digital markets. This paper assesses M&A regulations in China and Pakistan in light of the new digital economy. Expert interviews were conducted using semi-structured interviews to investigate the comparisons between Pakistan’s and China’s merger control regimes. The findings indicate that China’s merger control regulations are better adopted for the digital economy than Pakistani’s. It also sets out the policy implications for competition policy makers in Pakistan.

The impacts of stricter merger legislation on bank mergers and acquisitions: Too-Big-To-Fail and competition

The effect of regulations on the banking sector is a key question for financial intermediation. This paper provides evidence that merger control regulation, although not directly targeted at the banking sector, has substantial economic effects on bank mergers. Based on an extensive sample of European countries, we show that target announcement premia increased by up to 16 percentage points for mergers involving control shifts after changes in merger legislation, consistent with a market expectation of increased profitability. These effects go hand-in-hand with a reduction in the propensity for mergers to create banks that are too-big-to-fail in their country.

Understanding Pakistan's Merger Control Law

Pakistan’s Competition Act, 2010 (CA ’10) and Competition (Merger Control) Regulations, 2007 (CMCR ’07) prohibit mergers that substantially lessen competition. CA '10 specifically maintains that “No undertaking shall enter into a merger which substantially lessens competition by creating or strengthening a dominant position in the relevant market.” Both, CA ’10 and CMCR ’07, have laid down elaborate procedural guidelines as to determination and approval of mergers through reviews in two phases. This article highlights the must to know thresholds for the reader.

Public Interest Considerations in European Merger Control Regimes

Nowadays, merger control predominantly relies upon a strict analysis of the effects from merger and acquisitions on effective competition. However, there is scope for so-called public interest considerations in several European merger control regimes and recently a number of European politicians have called for more elbowroom for non-competition-oriented interventions into merger control. For instance, they did so in the context of the prohibition of the Siemens-Alstommerger and the upcoming industrial policy discussion about European Champions. Since the social welfare effects of competitive markets present an important public interest in itself, additional public interest considerations justifying an intervention need to be non-market in the sense that these goals stand in conflict with competition. However, a trade-off between effective competition and public interest, i.e. public interests that are better served through market power then through effective competition, is a rare phenomenon. This paper gives an overview of public interest considerations in the merger policy of European Union member states and analyzes four jurisdictions in more detail. We find that the institutional designs how public interests considerations are included in the merger control regimes lack focus on non-market public interest considerations across the analyzed jurisdictions. Furthermore, there are relevant shortcomings regarding transparency and legal certainty. Moreover, our ex-pots analysis shows that the empirical record of past public interest-motivated interventions is questionable with only few interventions yielding the desired effects. Therefore, we suggest revising the public interest regulations in the respective merger control regulations by narrowing their focus to real non-market public interests and by levying decision power on less politically-influenced bodies.

THE KNOWN UNKNOWN: IN SEARCH FOR A LEGAL STRUCTURE OF THE SIGNIFICANCE CRITERION OF THE SIEC TEST

This article establishes the thesis that the notion of “significant” in the SIEC test of the European Merger Control Regulation lacks a clear legal concept in the current decisional practice. Antitrust economists and authorities have developed a set of theories of harm and have constantly refined them. Yet these theories often do not explain when certain price-effects or other implications of a merger have reached an intensity that is “significant” in the meaning of Article 2 EU Merger Regulation (EUMR).1 This renders the notion of significance a “known unknown” in legal terms. It is argued here that this legal uncertainty as to the relevant definition of “significant” has led to an increase in discretion in the handling of merger cases, a bias toward the detrimental effects of mergers, and a deflation of potential efficiency considerations. The article purports that, as a consequence, mergers are often treated similarly to cartels in concentrating on the elimination of competition and regarding efficiencies as a rare exemption for which the parties carry the burden of proof. Against this background, it shall be attempted to construe a unitary concept of significance that integrates efficiency analysis and includes a differentiated allocation of the burdens of proof for procompetitive and anticompetitive effects of mergers.

Arbitrability of EU Competition Law-based Claims: Where Do We Stand After the CDC Hydrogen Peroxide Case?

In this article, we discuss the extent to which EU competition rules are arbitrable. There is a wide consensus that Articles 101 and 102 TFEU are fully arbitrable and we share that opinion. More challenging questions may, however, arise when the dispute subject to arbitration raises issues under the other competition provisions of the Treaty on the Functioning of the European Union, i.e. Articles 106 to 108, as well as in secondary EU competition legislation (e.g. the EU Merger Control Regulation). Moreover, in the recent CDC Case, the question has arisen as to whether arbitration is a suitable method to settle claims for damages arising from breaches of competition law made by one of the parties to a contract containing an arbitration clause. We discuss AG Jääskinen’s controversial Opinion, the judgment of the CJEU, and their possible implications on the arbitrability of damages actions based on breaches of EU competition rules.

About Law, Economics and Argumentation: The Forgotten Case of Labor Concerns in Brazilian Competition Policy and Why It Still Matters

Optimists would say the Brazilian competition policy has been a successful case of antitrust revolution in Latin America. However, the perceived success of competition law hides old inconsistencies in antitrust practice regarding an unusual topic: the interplay between merger control and labor market regulation in the 1990s. That policy interplay could well be seen as only an old miscarriage of “antitrust justice” in developing countries. It may not be the case, though. Past intersections of different regulatory domains, and the lack of accountability as to the reasons for abandoning labor concerns, can still affect the legitimacy of competition policy. Such failures in policy-making could also create conflicts between the Brazilian Competition Authority (CADE) and authorities responsible for enforcing labor laws. In view of those potential hurdles to antitrust implementation, this paper takes a normative stance on the question of how CADE could justify what appears to be a definitive shift in competition policy away from labor market regulation. My analysis is centered on policy justifications: instances of legal argumentation meant to support implementing decisions. Accordingly, antitrust decision-making is framed within the argumentative discourse of competition law, as a product of practical reasoning informed by legal rules and economic knowledge. That said, I do not offer a positive answer as to whether and how CADE should justify its decision to break the interplay between merger control and the regulation of labor markets. Instead, my claim is only that, in defense of such implementation choice, justifications grounded on economic theory may become, in practice, an informal fallacy. This paper thus contributes to the literature by identifying logical flaws in arguments that could justify a policy decision implicit in Brazilian competition law. As an unusual topic in antitrust policy, the broken interplay between merger control and labor market regulation also allows me to explore the impact of economic indeterminacy on legal discourse. I demonstrate that disagreements among economists can reduce the plausibility of arguments based on economic consequences. In doing so, this paper challenges some uses of economic analysis of law, as argumentation technique, in legal reasoning.

Arbitrability of EU Competition Law-Based Claims: Where Do We Stand after the CDC Hydrogen Peroxide Case?

In this paper, we discuss the extent to which EU competition rules are arbitrable. There is a wide consensus that Articles 101 and 102 TFEU are fully arbitrable and we share that opinion. More challenging questions may, however, arise when the dispute subject to arbitration raises issues under the other competition provisions of the TFEU, i.e., Articles 106 to 108, as well as in secondary EU competition legislation (e.g., the EU Merger Control Regulation). Moreover, in the recent CDC Case, the question has arisen as to whether arbitration is a suitable method to settle claims for damages arising from breaches of competition law made by one of the parties to a contract containing an arbitration clause. We discuss AG Jaaskinen’s controversial Opinion, the judgment of the CJEU, and their possible implications on the arbitrability of damages actions based on breaches of EU competition rules.

CONCENTRATIONS BETWEEN NON-EUROPEAN ENTERPRISES AND THE EUROPEAN MERGER CONTROL REGULATION

This paper examines the scope of the European Merger Control Regulation (EUMR). More specifically, it traces the development of the extraterritorial application of the EUMR. Furthermore, it reviews the European Commission’s assessment of concentrations between non-European enterprises. Surprisingly, concentrations with no actual foreseeable effects on the Single Market can be subject to mandatory notification. This has led to absurd cases being decided by the European Commission which will be discussed in more detail.

The dangers of ad hoc changes to merger control regulation: the Irish financial crisis: Table 1.

The dangers of ad hoc changes to merger control regulation: the Irish financial crisis: Table 1.

Ex-Ante and Ex-Post Control of Buyer Power

This paper considers the effects of buyer power under the antitrust laws. It focuses on EU antitrust law, namely Article 102 TFEU and the EU Merger Control Regulation, while taking into account the stance of US antitrust law. Recent investigations of several European antitrust authorities in the grocery sector have expressed concerns that concentration on the demand side can result in market foreclosure or anticompetitive exploitation of market participants. Also, in the US there is an ongoing debate about the anticompetitive and procompetitive effects of buyer power, which is inter alia reflected in the landmark decision of the US Supreme Court in Weyerhaeuser and in the merger control policies of the DOJ and the FTC. Against this background, the present paper starts with the definition of buyer power. It underscores the necessity to distinguish between single price monopsony on the one hand and individual bargaining power on the other hand, since the economic effects of these two types of buyer power deviate significantly. In subsequent steps, the paper analyses different theories of harm that can be raised with respect to buyer power. It discusses the effects of buyer power on allocative efficiency, dynamic efficiency as well as consumer welfare and draws conclusions from that for the enforcement of the antitrust laws.

The Appraisal of Mergers in High Technology Markets Under the EU Merger Control Regulation: From Microsoft/Skype to Facebook/WhatsApp

High technology markets are dynamic, fast-growing sectors characterized by a fast-paced innovation. Dominant positions in these markets may be challenged by innovators provided that entry barriers are not high. Competition authorities have to take into account these factors when reviewing the effects of merger operations on the competitive structure of high technology markets. This paper examines the approach taken by the Commission in assessing under the EU Merger Control Regulation (EUMR) the competition impact of mergers in high technology markets in the recent Microsoft/Skype, and Facebook/WhatsApp merger cases. The paper argues that, when reviewing mergers operations affecting high technology markets, due to the specific competition conditions prevailing in such markets, the Commission has assessed with care the parties' market shares, network effects and the interoperability between the products of the merged entity and those of competitors.

(Non-controlling) Minority Shareholdings as Self-Standing Transactions under EU Merger Control Analysis: Prospective Solutions

The 2013 Staff Working Document and the 2014 White Paper - 'Towards More Effective EU Merger Control' point to the existence of a potential enforcement / regulatory gap in the functioning of the EU Merger Control Regulation: acquisitions of non-controlling minority shareholdings may create anti-competitive effects and the current EU law mechanisms are not fully equipped to tackle such concerns. This contribution investigates the models that may be used to reform the EU merger control system, while avoiding overregulation, enhancing legal certainty, reducing costs and maintaining a high quality appraisal process. The steps that have been recently taken in order to bring the review of non-controlling shareholdings under Regulation 139/2004 are dealt with. This contribution's conclusions aim to provide the optimal solution meant to ensure a more effective system of merger control in the EU.

Competitiveness and Competition: International Merger Control from the Business Prospective

Increasing globalization of international markets has prompted development of economies of scale on the international level. Mergers and acquisitions is one of the ways for the multinational companies to increase their competitiveness and expand on the global market. This business strategy is limited by the existing merger control regulations on the national level. The multi-jurisdictional approval of trans-national mergers remains costly and lengthy procedure that negatively affects companies’ performance and growth. International antitrust, as it stands today hasn’t produced an optimal, universally accepted model to deal with the trans-national mergers. There are several alternative solutions in the form of bilateral cooperation of competition authorities, comity agreements, proposals to design an international competition treaty or delegate the merger control competence to an international organization like WTO. Special emphasis will be attributed to the example of the EU-US merger control cooperation as a model for other countries. Present research is aimed at analysis of the trans-national merger control from the position of the business community. What is the role and the position of the business on this issue? What are the benefits and challenges that companies encounter within existing merger control frameworks? Comparative and interdisciplinary approach is used in order to analyze this multi-dimensional issue from the substantive and procedural points of view. Present work provides arguments in favor of the existing and evolving cooperation among competition authorities and its value to the business community and calls for increased involvement of business representatives in the policy development process.

The Political Interface of Financialisation and the Regulation of Mergers and Acquisitions in the EU

Prior to the outbreak of the current global economic and financial crisis, the sheer number and volume of mergers and acquisitions set historically unprecedented records. A vast share of these transactions were undertaken by short-term oriented financial market actors, including private equity houses, hedge funds and other institutional investors. The article explains the adoption and ensuing adaptations of the supranational merger control at the level of the European Union (EU) on the basis of a critical political economy perspective. It argues that ever since its inception, EU merger control regulation primarily served to facilitate economic concentration, which was reinforced by a permissive stance of the European Commission. Alongside processes of financialisation and increased corporate reliance on financial market capitalisation, EU merger control underwent a substantive reform and additional adaptations, which in important ways sustained financial sector induced mergers.