In the previous chapters, we explored the ecosystem of financial markets and institutions. Now, we turn to a concept so fundamental that it underpins almost every financial decision ever made: the Time Value of Money ( TVM ) . This chapter introduces the core principles, definitions, and calculations that form the bedrock of valuation . 3.1 Introduction to Time Value of Money Would you rather have €100 today or €100 one year from today? Intuitively, you would choose to have the money today. This simple preference illustrates the most important concept in finance: a dollar (or euro) today is worth more than a dollar tomorrow. This is not because of inflation , though that can be a factor. It is because of money's earning potential : If you have €100 today, you can invest it. In a year, that investment could grow to €102, €105, or even more. The €100 you receive in the future cannot be invested until you receive it, and you therefore miss out on that entire period of potential growt...
Objectives
By the end of this lecture, students should be able to:
Understand the concept and purpose of merger control
Identify different types of mergers and concentrations
Explain how mergers are assessed under competition law
Understand major global merger control regimes
Appreciate the role of international cooperation in merger regulation
1. Introduction to Merger Control
1.1 Meaning of Merger Control
Merger control refers to the legal framework used to regulate mergers, acquisitions, and other forms of business concentrations. Its primary objective is to prevent transactions that may significantly reduce competition or create dominant market positions.
1.2 Rationale for Merger Regulation
While mergers can generate efficiencies and economic growth, they may also lead to reduced competition, higher prices, reduced innovation, and market foreclosure. Merger control seeks to balance economic benefits with the need to protect competitive markets.
1.3 Scope of Merger Control
Merger control applies to transactions that meet certain jurisdictional thresholds, such as turnover, assets, or market share. Many jurisdictions require pre-merger notification and approval by competition authorities.
2. Types of Mergers and Concentrations
2.1 Horizontal Mergers
Horizontal mergers occur between firms operating at the same level of the supply chain and competing in the same market. These mergers are closely scrutinised because they directly reduce the number of competitors.
2.2 Vertical Mergers
Vertical mergers involve firms operating at different levels of the supply chain, such as manufacturers and distributors. While often efficiency-enhancing, they may raise concerns about foreclosure of competitors.
2.3 Conglomerate Mergers
Conglomerate mergers involve firms operating in unrelated markets. Although generally less problematic, such mergers may still raise concerns regarding market power and leverage.
2.4 Joint Ventures
Joint ventures involve the creation of a new entity jointly controlled by two or more undertakings. They may be assessed under merger control rules if they perform functions on a lasting basis.
3. Merger Assessment Process
3.1 Notification Requirements
Most competition regimes require parties to notify proposed mergers to the relevant competition authority before completion. Failure to notify may result in penalties.
3.2 Market Definition
As in abuse of dominance cases, defining the relevant product and geographic market is central to merger assessment.
3.3 Substantial Lessening of Competition
Authorities assess whether the merger is likely to substantially lessen competition. This includes evaluating market concentration, loss of competitive constraints, and potential consumer harm.
3.4 Coordinated and Unilateral Effects
Merger analysis examines both unilateral effects, where the merged entity may raise prices independently, and coordinated effects, where firms may find it easier to collude post-merger.
4. Efficiencies and Remedies
Merging parties may argue that the transaction will generate efficiencies such as cost savings, innovation, or improved product quality. These efficiencies must be merger-specific and verifiable.
4.2 Structural Remedies
Structural remedies may include divestiture of assets or businesses to restore competition.
4.3 Behavioural Remedies
Behavioural remedies impose obligations on the merged entity, such as access commitments or price controls.
5. Major Global Merger Control Regimes
5.1 European Union Merger Regulation
The EU Merger Regulation provides a centralised system for reviewing mergers with an EU dimension. The European Commission assesses whether a merger would significantly impede effective competition.
5.2 United States Merger Control
In the United States, mergers are reviewed under the Hart-Scott-Rodino Act. The Federal Trade Commission and Department of Justice assess mergers using the “substantial lessening of competition” test.
China’s Anti-Monopoly Law requires notification of mergers meeting specified thresholds. Chinese merger control has become increasingly influential in global transactions.
6. International Cooperation and Convergence
6.1 Need for Cooperation
Global mergers often affect multiple jurisdictions, requiring cooperation among competition authorities to avoid inconsistent decisions.
6.2 International Competition Network
The ICN promotes best practices and convergence in merger control through guidelines and working groups.
The OECD provides policy recommendations and analytical tools that support effective and consistent merger enforcement.
7. International Case Laws on Merger Control
7.1 GE/Honeywell (2001) – EU
- The European Commission blocked the merger due to concerns that it would strengthen GE’s dominant position, illustrating divergencebetween EU and US merger analysis.
7.2 Airtours v Commission (2002) – EU
- The court clarified the standard for coordinated effects, emphasisingthe need for clear evidence of collective dominance.
7.3 Facebook/WhatsApp (2014) – EU
- The Commission approved the merger after assessing data-related competitionconcerns, highlighting the evolving challenges of digital markets.
8. Conclusion of Lecture 4
8.1 Summary
This lecture examined merger control as a preventive tool in competition law. It explored types of mergers, assessment criteria, global regimes, and international cooperation mechanisms.
8.2 Link to Next Lecture
The next lecture will focus on cross-border enforcement and cooperation, examining how competition authorities collaborate in investigating and prosecuting international competition law violations.
➡ Next Lecture: Lecture 5 – Cross-Border Enforcement and Cooperation
Merger Control /E-cyclopedia Resources by Kateule Sydney is licensed under CC BY-SA 4.0
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