18
Mergers

1. Events Leading to the Merger Regulation

Competition authorities tend to regard control over mergers between and acquisitions by large and powerful companies as one of their most important concerns. Authorities are concerned not only with the conduct of undertakings but also with the possible effects on market structures, and especially on the degree of concentration (and consequent increase in market power) which mergers may bring about in particular product and geographic markets. They naturally prefer, therefore, that such mergers are not allowed to occur without careful scrutiny of their likely effects on the competitive process: preferably before they occur, rather than afterwards. In the absence. however, of any rules for ensuring such scrutiny, two possibly undesirable consequences may occur. Undertakings which are prevented from making anti-competitive agreements with each other by the prohibition contained in Article 85(1) may simply determine that, to achieve the objectives of such agreements, they will merge their business operations into a single unit, thereby avoiding the reach of that Article: they may also, by their merger, increase the market power of their combined undertaking in a particular product or geographic market and thus reduce the scope for competition within it. Any competition authority, therefore, with inadequate substantive and procedural control over major merger proposals operates under a severe disadvantage.

Nevertheless, there seems little doubt that those responsible for drafting Articles 85 and 86 did not intend that this should give control over mergers to the Commission. Neither the actual wording of the Article nor the evidence of those who participated in the negotiations leading up to the Treaty or in its early administration support any contrary argument. Nevertheless, concern within DG IV over this apparent gap in its powers was felt even during its first decade of active operation when, as we have seen, it had a variety of other pressing problems to which prior attention had to be given, in particular those relating to vertical agreements. In a memorandum in 19661 it admitted that

____________________
1
"'Le problème de la concentration dans le Marché Commun'", Etudes CEE (Series Concurrence No. 3, 24 ( 1966). As a statement of principle this has now been overruled by the Philip Morris decision (n. 5) and inevitably therefore this part of Chapter 18 deals with Art. 85 as well as with Art. 86.

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