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According to Article 102 TFEU, the European Commission has the power to regulate behaviour of large firms it claims to be abusing their dominant position or market power, as well as, preventing firms from gaining the position within the market structure that enables them to behave abusively in the first place. Mergers that have a “community dimension” are governed by the Merger Regulation (EC) No.139/2004, all “concentrations” between undertakings are subject to approval by the European Commission.

A true merger, under to competition law, is where two separate entities merger into an entirely new entity, or where one entity acquires all, or a majority of, the shares of another entity, and is able to have control over that entity. Notable examples could include Ciba-Geigy and Sandoz merging to form Novartis, as well as Dow Chemical and DuPont merging to form DowDuPont.

Mergers can take a place on a number of basis. For example, a horizontal merger is where a merger takes place between two competitors in the same product and geographical markets and at same level of the production. A vertical merger is where mergers between firms that operate between firms that operate at different levels of the market. A conglomerate merger is merger between two strategically unrelated firms.

Under the original EUMR, according to Article 2(3), in order for a merger to be declared compatible with the common market, it must not create or strengthen a dominant position where it could affect competition, thus the central provision under EU law ask whether a concentration would if it went ahead would “significantly impede effective competition…”. Under Article 3(1), a concentration means a “change of control on a lasting basis results from (a) the merger of two or more previously independent undertakings… (b) the acquisition…if direct or indirect control of the whole or parts of one or more other undertakings.” In the original EUMR, dominance played a key role in deciding whether competition law had been infringed. However, in France v. Commission, it was established by the European Court of Justice, that EUMR also apply to collective dominance, this is also where the concept of collective dominance was established.

According to Genccor Ltd v. Commission, the Court of First Instance stated the purpose of merger control is “…to avoid the establishment of market structures which may create or strengthen a dominant position and not need to control directly possible abuses of dominant positions.” Meaning that the purpose for oversight over economic concentration by the states are to prevent abuses of dominant position by undertakings. Regulations of mergers and acquisition is meant to prevent this problem, before the creation of a dominant firm through mergers and/or acquisitions.

In recent years, mergers have increased in their complexity, size and geographical reach, as seen in the merger between Pfizer and Warner-Lambert. According to Merger Regulation No.139/2004, in order for these regulations to apply, a merger must have a “community dimension”, meaning the merger must have a noticeable impact within the EU, therefore the undertakings in question must have a certain degree of business within the EU common market. However, in Genccor Ltd v. Commission, the Court of First Instance (now the General Court) stated that it does not matter where the merger takes place, as long as it has an impact within the community, the regulations will apply.

Through “economics links”, a new market can become more conductive to collusion. A transparent a market has a more concentrated structure, meaning firms can co-ordinate their behaviour with relative ease, firms can deploy deterrents and shield themselves form a reaction by their competitors and consumers. The entry of new firms to the market, and any barriers that they might encounter should be considered. In Airtours plc v. Commission, although the Commission’s decision here was annulled by the CFI, the case raised uncertainties, as it identifies a non-collusive oligopoly gap in EUMR.

Due to the uncertainty raised by the decision in Airtours v. Commission, it is suggested that an alternative approach to the problem raised in the case would be to ask whether the merger in question would “substantially lessen Competition” (SLC). According to the Roller De La Mano article, the new test does not insist on dominance being necessary or sufficient, arguing that under the old law, there was underenforcement, a merger can have serious anti-competitive effect even without dominance.

However, there exist certain exemptions under Article 2 EUMR, where anti-competitive conduct may be sanctioned, in the name of “technical and economic progress, as well as the “failing firm” defence. Although the European Commission is less concerned with mergers taking place vertically, it has taken an interest in the effects of conglomerate mergers.