Friday, August 15, 2008
Posted by D. Daniel Sokol
Greg Werden (DOJ) has some thoughts on Unilateral Competitive Effects and the Test for Merger Control.
ABSTRACT: The EC Merger Regulation (ECMR) was revised in 2004 to make the substantive test for merger control whether the merger would "significantly impede effective competition [SIEC] in the common market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position". This SIEC test, which replaced the prior dominance test, was intended to work much like the substantial lessening of competition (SLC) test used in Australia, Ireland, the UK and the US.
Alberto Heimler explains that the change in the substantive merger test filled a perceived gap with respect to unilateral effects. He argues, however, that the gap was only imagined. In the context of two models giving rise to unilateral effects, he contends that significant anticompetitive effects arise only if the merged firm reasonably could be viewed as dominant. He also argues that the change in the substantive test has not led to additional prohibitions premised on unilateral effects, but it did create a danger of excessive enforcement.
My analysis of the models Heimler mentions indicates that the gap was real and potentially important. Moreover, stretching the concept of dominance to reach all significant anticompetitive effects from mergers would divorce the concept from the plain meaning of the word "dominance" and thereby create a serious risk of excessive enforcement under Article 82. In contrast, I doubt that the risk of excessive merger enforcement is substantial and think it worth taking.