Eu merger control and the compatibility test:a review of recent developments |
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Authors: | Davison Leigh M |
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Institution: | (1) Business School, Hull University, Hull, HU6 7RX, UK ( |
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Abstract: | The compatibility test contained in Article 2 of the Merger Control Regulation (MCR) is at the very heart of EU merger control,
for it determines whether a concentration with a community dimension is deemed compatible or incompatible with the common
market. Incompatibility can lead to prohibition of a concentration, although this is rare. The paper reviews the recent developments
to the conditions of the test itself as well as the analytical methods employed to determine compatibility. Concerning the
former, the new foreseeable dominance interpretation, put forward by the European Commission and made law by the Court of
First Instance (CFI), is explored. This new variant of the dominance condition is important on its own right but it is also
of major interest because of the explicit legal requirement placed on the Commission to assess the future likelihood of abusive
behaviour by the merging parties in its prospective analysis. This is not the case with the original dominance compatibility
condition. The unexpected but important clarification by the CFI of the notion of substantial part of the common market, as
contained in the express wording of the compatibility test, is also commented upon. Concerning the determination of compatibility,
the Commission's controversial employment in certain conglomerate concentrations of the range effects of competitive harm
theory is examined, as is the need to take cognisance of merger specific efficiencies when determining if a merger increases
societal welfare. The EU is making progress toward such an efficiencies assessment as part of the compatibility determination.
EU merger control – and hence the compatibility test – do not exist in a vacuum. The EU has played a major role in shaping
the new multilateral architecture and its goal of increasing international convergence in competition matters. This in turn
has led the EU to rethink the nature of the compatibility test. For example, it has sought to evaluate the dominance condition
of the compatibility test with the substantial lessening of competition (SLC) approach used by some other regulators, like
the US. The paper concludes by looking at a fundamental issue that has arisen from recent CFI judgements and the GE/Honeywell
merger: the competence of the Commission, or more accurately the Merger Task Force (MTF), to carry out the compatibility determination.
Proposals are outlined so as to ensure that the Commission's prospective analysis in a concentration case meets the requisite
legal standard. It is essential for this standard to be met if EU merger control is to remain credible.
This revised version was published online in July 2006 with corrections to the Cover Date. |
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Keywords: | compatibility test dominance or substantial lessening of competition test EU merger control foreseeable dominance substantial part of the common market |
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