Merger Control: Why and How
| Autor | Helmuth Schröter |
| Cargo del Autor | Professor of European Law at the University of Saarbrücken (Germany). Former Director and Hearing Officer of the European Commission |
| Páginas | 305-315 |
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Why is it necessary to control concentrations between undertakings? Would it not be better for the economy to let industrialists do their job without being subjected to State intervention? Mergers are even in the general interest of a country because they help to create powerful groups of companies in different economic sectors capable of acting as true national champions in competition with big foreign firms.
These are the kinds of arguments which you will often hear when discussing the question of merger control with industrial leaders. However, experience shows that such arguments are specious, since they overlook the central purpose of merger control, which is to protect competition. Free competition is one of the essential elements of any market economy. This is why competition rules have been adopted by all industrialised countries, as well as by the Member States of the European Union (EU) and even by the
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EU itself in Articles 81 to 85 of the EC Treaty and in the Merger Regulation1.
Such rules have three components:
(1) A general prohibition on cartels (i.e. agreements between undertakings, decisions by associations of undertakings and concerted practices restricting competition) with an exemption in favour of certain forms of cooperation which bring about substantial benefits for the economy;
(2) A strict prohibition on abuses of a dominant position, whether held by a single undertaking or jointly by several undertakings;
(3) Provisions on merger control.
Each of these rules has its specific function:
(1) The prohibition on cartels prevents undertakings from restricting their individual freedom in the market, which although it serves their own commercial interests often constitutes a challenge to their competitors. Collusion is the opposite of autonomy and distorts competition. It therefore had to be forbidden in order to ensure the normal functioning of the market mechanism.
(2) A strict ban on abuses of economic power is necessary to protect the dominant firms’ competitors and trading partners and also the final consumer from being treated in an unfair and anticompetitive manner. European and national law contain examples of such abuses which may be exploitative or exclusionary in nature. Predatory market strategies, inequitable prices, discriminatory trading conditions, refusal to deal and tying clauses are the most common examples in practice, and they all point to behaviour which a normal undertaking acting under normal market conditions would not be tempted to adopt. But the situation becomes dysfunctional where a single firm or several firms acting in parallel have acquired so much market power that they can dictate the conduct of their competitors,
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suppliers and clients. In such markets, competition is either absent or has become so weak that it is no longer effective. Third parties must therefore be protected by exceptional rules which force the undertakings in a dominant position to behave as if they were still exposed to effective competition. Only State intervention which replaces competition solves the problem, and we have to recognise that this is only a second-best solution.
(3) Merger control, on the other hand, is proactive in nature. Its aim is to prevent the interested parties from creating or strengthening dominant positions through concentrations. Here we can see a parallel with the provisions on cartels which allow cooperation between undertakings provided that the parties are not afforded the possibility of eliminating competition with regard to a substantial part of the products in question, or, in other words, the possibility of establishing or enhancing market dominance. Where dominant positions are acquired by internal growth, the law does not interfere because if it did, State intervention would be punishing the most efficient companies. It is true that certain national legal systems provide for the divestiture of dominant firms which have abused their economic power. However, as the end of the Microsoft case in the USA has shown, it is very hard to enforce such rules and they have rarely been applied.
In conclusion, the three components of competition rules form the backbone of a comprehensive system which ensures free, fair, undistorted and effective competition.
The need for a legal system allowing the control of concentrations between undertakings was recognised rather late in the day. The EC Treaty, unlike the previous ECSC Treaty, does not contain specific provisions for this purpose. Having considered the question, the founders came to the conclusion that, confronted with the challenge of the new large Community market, European industry required restructuring, and that mergers should therefore be encouraged instead of being controlled. The risk of monopolisation was at that time clearly underestimated.
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This was a serious mistake. Soon after the current EC Treaty’s predecessor, the EEC Treaty, came into force in the early 1960s, the first waves of merger fever reached Europe and gave rise to serious concern. The Commission examined the possibility of applying Articles 85 and 86 of the EEC Treaty (which have since become Articles 81 and 82 of the EC Treaty) to mergers. In its 1965 "Memorandum on the problem of concentration in the Common Market" it proposed to take specific actions based on the prohibition rule laid down in Article 82 with a view to blocking those concentrations...
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