Antitrust Trade and Regulation Alert
1 July 2009
Author:
Neil Baylis
neil.baylis@klgates.com
+44.(0)20.7360.8140
K&L Gates is a global law firm with
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ICN Sets Out Recommendations for Merger
Control Analysis
The International Competition Network ("ICN") consists of 107 member antitrust
agencies from 96 jurisdictions. The ICN aims to provide a forum for such agencies
to discuss antitrust policies and work towards convergence of procedure and
substantive assessments where appropriate.
Meeting in early June in Switzerland the ICN adopted three new Recommended
Practices for Merger Analysis:
•
Competitive Effects Analysis in Horizontal Merger Review - agencies should
carry out competitive effects analysis in order to assess whether a merger will
give rise to the creation or enhancement of market power - either unilaterally
or through coordinated effects. Such analysis should be grounded in both
sound economics and the facts of the particular case.
•
In analysing a merger for unilateral effects, agencies should assess whether the
merger will create or enhance market power and in doing so should apply the
economic theory or model that best fits the characteristics of the case.
Agencies should assess the competitive constraints and other factors applicable
to the merged firm's ability to exercise market power.
•
In analysing a merger for coordinated effects, agencies should assess whether
the merger increases the likelihood of successful co-ordination of behaviour or
strengthens existing coordination in a manner which harms competition
significantly. Agencies should assess whether the conditions for successful
coordination are present and should also assess the extent to which existing
competitive constraints and other factors would deter or disrupt effective
coordination.
The Recommendations are not binding but nonetheless reflect the intended best
practices of the agencies from the 107 agencies in attendance. Perhaps more
interesting, the ICN's recommendations provide yet another indication of
convergence in the analysis of mergers by antitrust agencies throughout the world.
In Europe, where large-scale mergers are governed by the EC Merger Regulation
("ECMR"), the substantive test applied by the European Commission is whether or
not a merger would significantly impede effective competition in the common
market or a substantial part of it, in particular as a result of the creation or
strengthening of a dominant position. This standard, adopted in 2004, is similar to
the standard employed in the U.S., which asks whether a merger would result in a
substantial lessening of competition.
Antitrust Trade and Regulation Alert
The ICN refers to "market power" rather than the
ECMR's reference to "dominant position" but
both require unilateral and co-ordinated effects to
be taken into account. Notably the ECMR now
presents the creation or strengthening of a
dominant position as being a particular example
of a significant impediment to effective
competition - but not a pre-requisite for such a
finding. The ICN’s concern with the
enhancement or creation of market power and the
analysis of unilateral and co-ordinated effects is
similar to the analysis undertaken by the U.S.
antitrust enforcement agencies, which employ a
set of merger guidelines as a framework
for their analysis.
agencies, where economic analysis plays a key
role in any substantive assessment - with teams
of economists commenting on all cases raising
substantive concerns. This was not the case
when the ECMR was first introduced in 1989.
The ICN's recommendations are perhaps the
clearest indication to date of convergence in the
assessment of merger by antitrust agencies
worldwide. As such it sets an extremely helpful
precedent for transactions that trigger
multinational merger filings where companies
may now begin to see more evidence of a
consistent approach to merger analysis where
agencies in different counties simultaneously
analyse the same merger.
The ICN refers to the use of economic theories
and models in the assessment of unilateral effects
and this again reflects the current practice under
the ECMR and the U.S. antitrust enforcement
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1 July 2009
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