Introduction

The regulation of mergers and acquisitions is the principal instrument by which competition authorities control the structure of an industry. In this chapter we are concerned with mergers that increase the market power of a single firm. It might be argued that since dominant firms can be regulated under Article 82, there is no need for a merger policy: one can allow mergers creating a dominant firm and regulate that firm's behaviour ex post. Furthermore, there is evidence that most mergers do not reduce competition, so that merger policy is a disproportionate response. However, merger law is necessary for the following reasons First, once the market is dominated by one or a few strong firms, the competition authorities may not have the resources or the information to pursue every anticompetitive action so that preventing the merger is a more cost-effective way of maintaining competition. Second, merger policy may be to the benefit of the merging firms – it might be problematic if two firms are allowed to merge and become dominant only to be assiduously regulated after the merger, or even broken up by the competition authorities some years after the two businesses have been integrated. Third, even if fully resourced, the competition authorities might not be able to remedy all the anticompetitive effects of a change in market structure (e.g. mergers in oligopoly markets considered in chapter 9).