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
In August 2010, the U.S. antitrust agencies released the final version of their revised Horizontal Merger Guidelines, which they use to analyze the competitive implications of mergers between competitors. Whereas the prior (1992) version of the Guidelines had sought to provide a precise, step by step framework for analyzing horizontal mergers — centered around defining…
In two recent decisions, the Commission considered the impact of cooperation agreements that the notifying parties had entered into before the notified transaction and came to two different conclusions. In Iberia/British Airways (decision of 14 July 2010), the Commission was confronted with combined shares of 70-80% for time-sensitive passengers on two city pairs, London-Madrid and…
An increasing number of voices are claiming that the Commission’s enforcement policy under the ECMR is becoming too lenient. At the end of last year, two Commission officials, Mr. Parplies and Mr. Maier-Rigaud, published a detailed study on the drop in enforcement decisions (prohibitions, approvals with conditions and termination of merger agreements resulting from the…
In my last post, I focused on a procedural element of the Commission’s Microsoft/Yahoo! decision. The decision is also very interesting from a substantive point of view, and shows the Commission’s determination to investigate the transaction in some detail, even though on the face of it (as the Phase I clearance subsequently confirmed), it raised…
The Commission’s recent decision approving Microsoft’s acquisition of Yahoo!’s Search Business (including internet search and search advertising) contains an interesting application of the definition of a concentration under the Merger Regulation. In December 2009, Microsoft and Yahoo entered into a License Agreement and a Search and Advertising Services and Sales Agreement. Microsoft will acquire a…
On 6 July 2010, the General Court rejected Ryanair’s appeal against the Commission’s 2007 prohibition of its hostile take-over of rival Irish airline Aer Lingus. On the same day, the Court also issued a much shorter judgment in Case T-411/07, and rejected an Aer Lingus appeal against a Commission decision, which refused to order Ryanair…
On Friday 2nd July, Monty Widenius, founder of open source database company MySQL, owned by Sun, filed an appeal against the European Commission’s unconditional clearance of the merger between Oracle and Sun Microsystems. The main affected area in this case was the database market. This market is highly concentrated with the three main proprietary database…
When the Commission’s Remedies Notice was published in 2008, many commentators thought the Notice’s requirements for parties to a concentration to offer an acceptable remedy were too demanding. The concern was that especially under the short and strict timeframe in Phase I, it would be close to impossible to convince the Commission to accept anything…
On April 20, 2010, the German Federal Court of Justice quashed the Düsseldorf Court of Appeal’s decision in Phonak/GN, which upheld the FCO’s merger prohibition of the acquisition of GN ReSound by Phonak, both active in hearing aids in Germany. The merger would have combined number two and four in the market, with aggregated market…
