14 Excursion: Merger Control
14.1 General Remarks
Merger control and competition law in general belong to things that lawyers will
focus on in legal due diligence. It is therefore useful to have a look at the effects of
European merger control on acquisitions.
Economic efficiency. To begin with, acquisitions can increase efficiency. For
example, combining the activities of two firms can allow them to develop new
products more efficiently or to reduce production or distribution costs through
economies of scale. In principle, this might make the market more competitive and
enable consumers to benefit from higher-quality goods at fairer prices.
On the other hand, some acquisitions may reduce competition in a market. For
example, they might create or strengthen a dominant player. This could harm cus-
tomers and consumers through higher prices, reduced choice, or less innovation.
For such reasons, merger control is an important concern in large business ac-
quisitions. In the EU, acquisitions can be constrained either by EU merger control
or national merger control. EU merger control is based on the competition law
provisions of the EC Treaty (Articles 81 and 82) and the EC Merger Regulation.^1
Article 81, early days. Article 81(1) of the EC Treaty prohibits agreements, de-
cisions and concerted practices between two or more firms which restrict competi-
tion. Such things are nowadays prohibited automatically without any prior deci-
sion by the competent authorities being necessary.^2
As individually negotiated business acquisitions are based on agreements, it
seems clear that Article 81 could be applied to business acquisitions. In the early
days of the EEC, however, the Commission believed that concentrations helped
firms to grow, take advantage of the common market, and meet competition from
large enterprises outside the EEC. In other words, they were regarded as a good
thing. In a 1966 memorandum, the Commission said that “[i]t is not possible to
apply Article [81] to agreements whose purpose is the acquisition of total or par-
tial ownership of enterprises or the reorganisation of the ownership of enterprises
(merger, acquisition of holding, purchase of part of the assets.”^3
(^1) Regulation 139/2004 on the control of concentrations between undertakings (the EC
Merger Regulation).
(^2) Article 1(1) of Regulation 1/2003.
(^3) Memorandum on the Concentration of Enterprises in the Common Market. Study No. 3
(Brussels 1966).
P. Mäntysaari, The Law of Corporate Finance: General Principles and EU Law,
DOI 10.1007/ 978-3-642-03058-1_14, © Springer-Verlag Berlin Heidelberg 2010