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4 Substantive Assessment For Merger Control Notes

LLM Law Notes > International Merger Control Notes

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MCL -International Merger Control

4 - Substantive Assessment for Merger Control Mind Map Abbreviation U - Undertaking SIEC Test - significantly impede effective competition test

Historical Evolution

The Dominance Test

EUMR - originally prohibited concentrations
- "dominant position" with
- -effective competition would be significantly impeded in common market Test - limited:
- Not cover coordinated effect (/collective dominant i.e. oligopoly) Art 102 -" concept of dominance" -ability to act independently Tests used in cases: Airtours/First Choice - dominance testblocked Oracle/Peoplesoft - dominance test-cleared Sony/BMG - dominance test-cleared T-Mobile/Tele.ring - SIEC-cleared. Example of case study:Art 2(3) of Old ECMR (Regulation 4064/89): "A concentration which creates or strengthens a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it shall be declared incompatible with the common market." This test only manage to cover mergers which:
? lead to a single firm being dominant in the market (single firm dominance) or
? a few firms colluding (collective dominance). Loophole in the test:
? mergers that do not lead to a firm being dominant or collusion of firms Dominance Test:

* Emphasises on market definition and

The SIEC Test (2004) The dominance test was changed to the SIEC test. SIEC test is used:?


To fill the loophole in Dominance Test. To prohibit transactions with competition effect even if dominance is not created or strengthened To provide solution to cover a concentration which fulfil the following criteria: (1) significantly impede effective competition (2)in the common market /in a substantial part of it, (3) as a result of the creation/
strengthening of a dominant position shall be declared incompatible with common market.


* The test is an economics-based tool used to assess the competitive effect 1

MCL -International Merger Control Airtours/First Choice Fact: The relevant product market: supply to tour operators of seats on charter flights to short-haul destinations. The relevant geographic market is the UK. Pre-merger Thomson :30.7%
Airtours: 19.4%
Thomas Cook: 20.4%
First Choice : 15%



market shares and weighs to competitor concerns. Most EU Member States adopt this test. Fails to cope with anti-competitive mergers between non-dominant firms.



Post- Merger Airtours/First Choice: 34.5%
Thomson: 30.7%
Thomas Cook: 20.4%
Cosmos/Avro: 2.9%

No single firm being dominant after merger between Airtours and First Choice. However, the market had a high degree of price transparency and multi-market contacts among the major airlines may facilitate coordinated behaviour. Issue: Is it a "Gap" in Airtours/First Choice?
? the merger would not lead to single firm dominance/collective dominance.
? the merger was blocked because it was alleged that it would lead to collective dominance.

of mergers. No longer using "dominance" as the substantive test for mergers. Enhance the international cooperation as the test brings ECMR in line with international competition regimes (UK, USA).


* The change from dominance test to SIEC test required a transitional period.

* The implementation of new SIEC test required interpretation of the new standards of the SIEC test.Difference between dominance test and SIEC test:

* Dominance Test: market definition as a prima facie indication of anticompetitive effects

* SIEC Test: focuses on the impact of the merger on existing competitive constraints.

Decisions: CFI annulled the decision in

2002. No factors indicating likelihood of collective dominance as also outlined in an MMC report on foreign package holidays in UK in 1997.

2 MCL -International Merger Control Horizontal Merger

1. Benefit of effective competition: low prices, high-quality products, a wide selection of goods and services, and innovation (to customers).

2. Commission prevents horizontal mergers that would be likely to deprive customers of these benefits.

3. The horizontal mergers may do so by significantly increasing the market power of companies to influence the competition on the market.

4. Relevant Act: Guidelines on the assessment of horizontal mergers under the Council Regulation on control of concentrations between U(s).

Analytical Framework?Merger control - avoid increase in market power - "ability of 1/more firm to profitably increase price, reduce output, choice of quality of goods/services, diminish innovation.Form CO - data in relation to affect market "2/more parties to concentration will lead to a combined market share of 15% more."Commission's process of analysis: o counterfactual o relevant market (market definition) o assessment of transaction's competitive effect using:
-measures of market power & structure;
-structure & behaviour analysis

Counterfactual Extract which transaction changes the ?
condition of competition Eg. CocaCola- already has huge influence over British bottles' strategy, thus the

Market Definition It is a tool to assist fact-finder to determine whether 1 or more undertakings have market power (i.e. ability to raise price above the competitive level)



Market Power Structure A range of quantitative measures are employed to assess competitive structure of market + implication of transaction Where market shares are difficult to 3

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