European Merger Control

European Merger Control

Do We Need an Efficiency Defence?

Edited by Fabienne IIzkovitz and Roderick Meiklejohn

This book examines the background to a change in the legal framework which occurred in May 2004 with the entry into force of a new Merger Regulation that for the first time explicitly recognises the possibility of an efficiency defence. European Merger Control assesses the likely impact of this new regulation, and discusses the pros and cons of the efficiency defence, how other merger control systems deal with efficiencies, how the investigation process can be organised to accommodate the analysis of efficiency gains and the main theoretical and practical problems which arise when anti-competitive effects have to be weighed against efficiency gains.

Chapter 2: European Merger Control: Do We Need an Efficiency Defence?

Fabienne Ilzkovitz and Roderick Meiklejohn

Subjects: economics and finance, competition policy, industrial economics, law - academic, competition and antitrust law


2. European merger control: do we need an efficiency defence? Fabienne Ilzkovitz and Roderick Meiklejohn Since the end of 1990, the European Commission has had specific powers to control mergers with a Community dimension under the merger regulation.1 This system of merger control at the Community level was created because globalization and the dismantling of non-tariff barriers in the Single Market resulted in major corporate reorganizations in the Community, particularly in the form of cross-border mergers. Such restructuring is welcome if it enables firms to exploit the new opportunities created by a wider market and enhances their efficiency. However, mergers can also be a means to increase market power. The control of mergers at the Community level must therefore ensure that those mergers which do not enhance efficiency and which may distort competition in the Community are forbidden. However, the 1989 merger regulation was traditionally interpreted as requiring mergers to be judged on the basis of their anti-competitive effects alone and does not allow efficiency gains to be used to justify mergers which would otherwise be unacceptable. In January 2004 the Council of Ministers adopted a new merger regulation.2 Amongst other things, the new regulation changes the criteria (the substantive test) for deciding whether a merger should be permitted or forbidden and provides a somewhat firmer legal basis for the consideration of efficiency gains than existed in the old regulation. These aspects of the new regulation are described in Section 2.1 of this...

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