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LPC Law Notes International Competition and Anti-Trust Notes

Merger Control Notes

Updated Merger Control Notes

International Competition and Anti-Trust Notes

International Competition and Anti-Trust

Approximately 103 pages

A collection of the best LPC International Competition and Anti-Trust notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor". In short these are what we believe to be the strongest set of International Competition and Anti-Trust notes available in the UK t...

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Merger Control

Outcomes

  1. Recognise the basic elements common in all merger control regimes

  2. Appreciate the merger rules which apply in the EU, UK and US

  3. Recognise and apply the concepts of a ‘concentration’ with an ‘EU dimension’ under the Merger Regulation

  4. Understand the substantive test contained within the Merger Regulation

  5. Identify when a ‘relevant merger situation’ arises under UK merger rules

  6. Develop letter writing skills

Outcome 1 – basic elements of merger control regimes

Basic Info
  • Process of merging is not in itself anti-competitive it is the effect the mergers have on the competitive dynamic of a market which is subject to merger control

  • Merger any transaction whereby two or more previously independent entities come under common control

  • Merger control rules operate to prevent an increase in market power which harms consumers’ interests

Notice and Review
  • Most adopted means of control is by notification and review

  • Companies which intend to merge, and whose arrangements exceed designated thresholds, must notify competition authorities before merger can go ahead

  • Agency will then review merger and see if it can go ahead or if it needs conditions implemented

  • Review process is subject to strict time limits so the merger can proceed

Outcome 2 – Merger rules in EU, UK and US; Outcome 3 – concepts of ‘concentration’ and ‘EU dimension’; Outcome 4 – the substantive test within the Merger Regulation

EU Merger Control - Merger Regulation – Council Regulation 139/2004/EC
Jurisdictional issues
  • Mergers are required to be notified to the Commission where there is a ‘concentration’ that has an ‘EU dimension’

  • Notification is required where the arrangement is of a type (concentration) and size (an EU dimension) which should be examined by the commission before the merger can go ahead

  • Notification is mandatory where the Commission has jurisdiction (failure to do so = fines and requirement for merger to be reversed)

  • Competition authorities of EU MS do not have jurisdiction to examine mergers unless the Commission specifically decides to refer a transaction, in whole or in part, to such authorities

  • Can be beneficial to parties as they only have to make one application

Concentration (Art 3)
  • Issue is whether the transaction results on a lasting basis in a change in the structure of the market – concern is with establishing the economic potential of the transaction and therefore the economic unit (i.e the concentration) being created

  • Art 3(1): concentration exists where:

    • Two or more previously independent undertakings merge; or

    • One or more undertakings acquire ‘whether by purchase of securities or assets, by contract or by other means, direct or indirect control of the whole parts of one or more other undertakings’

  • Concentration can arise where there is an acquisition of sole control (such as a takeover), a pure merger (two undertakings combining) or an acquisition of joint control (such as a joint venture)

Control

  • Means more than just voting control

  • Assessed by reference to the ‘possibility of exercising decisive influence on the undertaking’ (Article 3(2)) – e.g. ability to block resolutions

  • Control does not have to be obtained by one undertaking but can be satisfied where there is joint control

Joint venture and concentration

  • Joint ventures are a common form of business vehicle, commonly used where parties pool their respective resources into a specific company (a joint venture company)

  • Key requirements for concentration in Joint Venture:

    • there must be joint control, which generally exists where there is negative control over key strategic decisions, in particular in relation to the budget, the business plan, major investments, and the appointment of senior management; and

    • the joint venture must be a ‘full function’ entity, which generally means that the joint venture company must have sufficient financial, human and other resources to carry on, on a lasting basis, independently from its parent companies.

‘EU dimension’ (Art 1)
  • Assessed under the Merger Regulation by reference to the turnover of the parties

  • Turnover thresholds contained in Art 1 of the Merger Reg

    • Art 1(2) – higher set of threshold

    • Art 1(3) – lower set of threshold

  • Care must be taken as to assess whether the test relates to combined or individual turnover

  • Jurisdictional Notice outlines rules relating to turnover

    • identifying the correct undertaking for the purpose of turnover (para 129 onwards);

    • group turnover (para 175 onwards);

    • joint venture turnover (para 186);

    • the correct accounts (para 169 onwards);

    • where the turnover is generated (para 196 onwards)

Turnover thresholds

The turnover thresholds will be exceeded whereeither:

  • Art 1(2)(a) - The combined aggregate worldwide turnover of all the undertakings concerned is more than EUR5 billion (this threshold is intended to exclude mergers between small and medium-sized companies); and

  • The aggregate EU-wide turnover of each of at least two of the undertakings concerned is more than EUR250 million (this threshold is intended to exclude relatively minor acquisitions by large companies or acquisitions with only a minor European dimension),

unless each of the undertakings concerned achieves more than two-thirds of its aggregate EU-wide turnover within one and the same member state (this threshold - the so-called "two-thirds rule" - is intended to exclude cases where the effects of the merger are felt primarily in a single member state, when it is more appropriate for the national competition authorities (NCAs) to deal with it) (Article 1(2), Merger Regulation)

or:

  • The combined aggregate worldwide turnover of all undertakings concerned is more than EUR2.5 billion (instead of EUR5 billion); and

  • The aggregate EU-wide turnover of each of a least two of the undertakings concerned is more than EUR100 million (instead of EUR250 million); and

  • The combined aggregate turnover of all undertakings concerned is more than EUR100...

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