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 3: Efficiency Gains from Mergers

Lars-Hendrik Röller, Johan Stennek and Frank Verboven

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


3. Efficiency gains from mergers Lars-Hendrik Röller, Johan Stennek and Frank Verboven The purpose of this chapter is to contribute to the analysis of two questions: Should a merger control system take into account efficiency gains from horizontal mergers, and balance these gains against the anti-competitive effects of mergers? If so, how should a system be designed to account for efficiency gains? There are several reasons why efficiency gains from horizontal mergers are an important issue today. Business conditions are changing rapidly, for example as a result of the internal market, increased global competition, and the deregulation of many industries. The consequent need to adapt the industry structure has generated a wave of mergers in Europe as well as in the rest of the world. The current wave is of historical proportions. All mergers with a so-called Community dimension must be notified to the Commission and are subsequently reviewed under the merger regulation.1 According to Articles 2(3) of the regulation, a concentration which ‘creates or strengthens a dominant position as a result of which effective competition would be significantly impeded’ shall be prohibited. Otherwise it shall be allowed. According to Article 2(1)(b), the Commission shall, in making this appraisal, amongst other things take into account ‘the development of technical and economic progress provided that it is to consumers’ advantage and does not form an obstacle to competition’. The latter clause has triggered a debate whether the merger regulation...

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