Mergers &
Acquisitions-GOs
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Anticompetitive effects of mergers
Effect on businesses of anticompetitive
mergers
Implications of Global Mergers
Merger
Acquisition
Company
Company
A
X
Company
Company
C
X
Company
B
Company
Y
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Diversification of trade and service activities
Achieving optimum size of business
Enhance profitability
Widening Customer base
Economies of scale
Pooling resources
Dynamic efficiency
Escaping Gestation Period
Merger
Horizontal
Vertical
Backward
Integration
Conglomerate
Forward
Integration

Most likely to raise competition concerns

Reduction in Number of Players
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Concentration of Economic Power
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Growth of monopoly power/ Dominance
Factors for Anti-competitive effects’
Assessment:
 Homogeneity/ Heterogeneity of
products/services
 Co-ordinated Effects : Ability/ Inability to coordinate pricing/output decisions
 Unilateral Effects: Ability/ Inability to raise prices
post transaction
 Ease of entry/ expansion in the Relevant Market
 Whether either party is a potential failing
enterprise
 Likely Pro-competitive effects of the Merger
No reduction in Number of players
 Efficiency enhancing- Unlikely to result in
competitive injury.
 Likely to produce injurious effects where either
party is dominant in the relevant market:
1. Market Foreclosure
2. Facilitating co-ordinated behaviour in
upstream/downstream markets

Most unlikely to result in any competitive injury.
 Potential Competition concerns:

1. “Deep Pockets”Theory.
2. Entrenchment
3. Reciprocity
4. Bundling and Portfolio Effects
5. Multiple Market Strategies
•
MERGERS EXEMPT FROM NOTIFICATION
• Negligible Impact - Where mergers Are Between Small
Enterprises- Small Mergers Not Subject to Review and
Approval
•
SMALL MERGERS SUBJECT TO NOTIFICATION
• No effect on market unless mergers cause AAEC

Anti-Competitive
merger
have
a
lasting
and
permanent change than anticompetitive agreements

Horizontal Mergers may have an intent of reducing
direct competitors and, hence, competition

Price Increase- Increased market power may result in
price increase of product or services.

Before Merger Control was applicable in U.S.
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U.S. Standard Oil Co. sought to restrict
competition
by
consolidating
refineries
throughout the U.S. Into a mammoth enterprise.

Prosecuted and divided into several distinct
companies in 1911.
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Competitors provide competitive restraint. Horizontal merger
leads to elimination of competitors and concentration of market
power in a few hands

Deustche Borse/NYSE Euronext- Within the exchange traded
derivative market, the of the two major competitors would enjoy
90% market share. Declared incompatible.

Primary fear is that where the vertically
integrated entity has market power, it may
foreclose the market or a source of supply to its
competitors.

GE/Honeywell- Vertical foreclosure concerns
arose since- among others- Honeywell was the
sole supplier to Rolls Royce

Multi-National Mergers can bring efficiencies
and investment in an economy

Global mergers will also bring in new
technologies to an economy

Multi-National mergers can also take away profits to a
foreign country

Ownership of the acquired enterprise will flow out of
the country

Perceived National Symbols may be considered as
valuable by foreign owners
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CONTACT
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