User:Patricija Kr/sandbox

The Significant Impediment of effective Competition test (SIEC) was enforced in 2004 which aims to maintain effective competition by preventing the formation of harmful concentrations that create or strengthen dominant positions which would impede competition in the common market or the substantial part of it. The old test didn’t undergo drastic changes, it was simply rephrased by switching words other way around. The new question that the test focuses on is whether the merger would lead to a SIEC rather than whether the merger would create or strengthen a dominant position which results in SIEC. This means that dominance is no longer necessary neither a sufficient factor. Other important functions of the test which should be addressed are: SIEC targets the underenforcement gap by eliminating uncertainty that was caused by the previous test as well as allows the commission to examine complex merging processes on a detailed level. It’s important that the previously mentioned underenforcement gap would be eliminated. Only by looking at cases where the update version of substantial test was applied the effectiveness of the changes and how commissions approach has changed can be determined. According to Lars-Hendrik Röller and Miguel De La Mano the old test could have solved the issues, but the new test improved the clarity which is crucial to the undertakings that are intending to merge. Market power by itself isn’t harmful if it doesn’t reach level which threatens effective competition. Prior to the merging process it’s important to consider how much will the market power increase and how much will it impact consumer welfare. This was especially important when the old test was still in use because it all came down to the most important factor if it creates or strengthens the dominant position. But with there being too much focus on the market power because dominance used to be the main requirement other effects on the market were forgotten. Horizontal type merger is always more concerning than vertical or conglomerate. When two undertakings which belong to the same level of the supply chain in the market merge that produces negative effects which damage effective competition and consumer welfare. Merging firms have large market powers already as well as the firms that merge horizontally are close competitors which automatically decreases active competition. Even though commission’s decision was annulled, the case of airtours plc v commission illustrates how Horizontal mergers effect the market. In the case of airtours the number of holiday companies in the UK were reduced from 4 to 3 overnight. Which in other words means that the market power was shifted, of course this is a profitable move to the undertakings in question but an adverse effect on consumers because the merger will decrease the choice of the holiday companies and increase the prices. The commission knew that they weren’t coordinating their effects, but the final result of that merger could possibly have damaging effects on the holiday market (Unilateral effects). The commission will take such factors into account when assessing whether a non-collusive oligopoly can amount to SIEC. Defenses available under the new substantial test (SIEC) New SIEC test allows the commission to take efficiencies into account under 101 (3) which can be used as a defense. Prior to the 2004 changes dominance by itself would amount to SIEC but now that dominance is no longer required, it allows to consider efficiencies. It might seem at first that the merger will impede effective competition on the market, but it might produce followed efficiencies which result in positive effects on the market. Under the old test the commission wasn’t even allowed to take efficiencies into account. But of course, certain requirements have to be met in order for efficiencies defense to be available. As its stated in the article 101 TFEU section 3 it needs to benefit consumers, innovation of the product, technical or economical aspects. The benefit has to directly derive from the merger also it cannot be achieved in any other way that’s less anti-competitive or is not a direct consequence of the merger in question and finally the benefit has to be evidentiary. Second defense which could be put forward is the failing firm defense. Let’s say if the firm was failing in any case and was exiting the market merger can save it. This might reduce competition which exist in the market, but it won’t damage competition because if the merging wouldn’t have happened the competition would have been reduced anyways because the firm wouldn’t have survived and was forced to exit the market. One of the cases where the failing firm defense was applied was the case of acquisition of Greek airline Olympic Air by Aegean Airlines. After a thorough investigation the decision to allow the acquisition was accepted in 2013, even though almost 3 years prior to 2013 decision commission denied the acquisition. The Commission's Vice-President who‘s in charge of competition policy, Joaquín Almunia explanation on the reasoning behind allowing the acquisition was: "It is clear that, due to the on-going Greek crisis and given Olympic's own very difficult financial situation, Olympic would be forced to leave the market soon in any event. Therefore we approved the merger because it has no additional negative effect on competition." Due to the positive progress that the new substantive test brought, commission is more flexible in making decisions based on individual case circumstances especially when efficiencies are now taken into consideration. When the test has undergone such development and dominance is no longer the main focus point, other factors are now recognized and evaluated how will they impact different elements of oligopolistic market.