An amalgamation or joining of two or more firms into an existing firm or to form a new firm. A merger is a method by which firms can increase their size and expand into existing or new economic activities and markets. A variety of motives may exist for mergers: to increase economic efficiency, to acquire market power, to diversify, to expand into different geographic markets, to pursue financial and R&D synergies, etc. Mergers are classified into three types:
Horizontal Merger: Merger between firms that produce and sell the same products, i.e., between competing firms. Horizontal mergers, if significant in size, can reduce competition in a market and are often reviewed by competition authorities. Horizontal mergers can be viewed as horizontal integration of firms in a market or across markets.
Vertical Merger: Merger between firms operating at different stages of production, e.g., from raw materials to finished products to distribution. An example would be a steel manufacturer merging with an iron ore producer.
Vertical mergers usually increase economic efficiency, although they may sometimes have an anticompetitive effect.
Conglomerate Merger: Merger between firms in unrelated business, e.g., between an automobile manufacturer and a food processing firm.
Source: OECD
The Commission published the text of its most recent prohibition decision in Deutsche Boerse / NYSE Euronext. The Decision is lengthy and the Commission appears to have formulated a response to most arguments proffered by the parties. However, a review of the Decision brings to the fore a number of ways in which the Commission…
Many new economic analysis tools have been introduced, particularly for merger analysis during the last decade. Some of these tools have also raised considerable public interest. For instance, probably not many have avoided hearing of the UPP test, and undoubtedly many are already familiar with the meaning of the abbreviations GUPPI, IPR and CMCR. The…
In 2007, the European Commission prohibited Ryanair’s attempted hostile bid to acquire rival Irish airline, Aer Lingus. It also refused to order Ryanair to divest its 29.8% stake in Aer Lingus, which it had built up during its aborted public bid. The General Court later upheld both the prohibition of the merger and the refusal to require divestment of the minority shareholding. Subsequently, the UK Office of Fair Trading investigated Ryanair’s minority shareholding in Aer Lingus; Ryanair’s challenges to the OFT’s jurisdiction were rejected by both the Competition Appeal Tribunal and the Court of Appeal. On 1 June the Supreme Court refused Ryanair leave to appeal, thus confirming the OFT’s ability to investigate the transaction, which it referred to the Competition Commission on 15 June. However, immediately thereafter, Ryanair launched a third hostile bid to acquire Aer Lingus, leading to further litigation before the CAT to challenge the Competition Commission’s jurisdiction.
This blog post examines the complex interaction of European Commission and national authority jurisdiction to examine different transactions involving the same parties, as well as the OFT’s reasons for referring Ryanair’s minority shareholding to the Competition Commission.
Ten years ago today, new rules to bolster competition law enforcement in Ireland – set out in the Competition Act 2002 – entered into force. Introducing the new law, then Minister for Enterprise, Trade and Employment, Mary Harney, heralded “ … a more focused approach towards penalisation of anti-competitive activities, more sensible arrangements for how…
Merger challenges are rare in Canada. The last contested merger case in Canada was in 2005. Typically, concerns about a prospective merger are resolved in negotiations between the Commissioner of Competition (the “Commissioner”) and the acquiring party, with some form of partial divestiture the usual remedy required. As such, it was a major development when…
On 12 June 2012, the Austrian council of ministers has adopted a proposal for an overhaul of the Austrian Cartel Act and of the Competition Act. If passed by parliament, which is likely, the amendment will become law on 1 October 2012. This post considers the proposed key changes. (Once the bill has been duly…
This post was written by Ms. Renata Leka and Mr. Erlind Kodhelaj of Boga & Associates, Tirana, Albania. The Albanian Competition Authority recently circulated for comments its new draft guidelines entitled “On the Control of Concentrations involving Undertakings” (“the Guidelines”). Key highlights Law No. 9121, dated 28.07.2003, “On the Protection of Competition” (“the Law”) requires…
The Competition Appeal Tribunal has upheld the Competition Commission’s decision to require Stericycle to divest the entirety of Ecowaste Southwest following its prohibition of the completed merger. In dismissing Stericycle’s appeal, the Tribunal confirmed that the Commission is not obliged to identify of its own motion all possible remedies, but merely those that would clearly resolve the harm to competition caused by the merger. It also held that, in a completed merger, the purchaser takes the risk of being required to divest the entire business acquired by it, if this is necessary to restore effective competition.
On 19 May 2012, China’s Ministry of Commerce (‘MOFCOM’) announced its conditional clearance decision on the acquisition of Motorola Mobility by Google, which removed the last hurdle for the USD12.5 billion vertical deal. The MOFCOM is the only antitrust authority to impose remedies on its clearance of the transaction. The US Department of Justice, the…
A recent CC decision, Stericycle/Ecowaste Southwest, in which it prohibited a completed merger and required the divestment of the acquired business, is a salutary reminder to companies that do not wait for merger clearance before completing their transaction.
