Approving Mergers

The EU Commission may permit a concentration if its terms and conditions have been changed so as to be compatible with the single market.  This may be by way of undertakings given.  There is a provision for prolongation of the relevant time limits when there are negotiations ongoing regarding the giving of commitments.

Negotiated clearances are relatively common.  Entities may agree to divest themselves of certain parts of their business or to separate them.  Parts of the business may be required to be sold off.

The Commission decides whether the concentration is compatible with the common market.  A concentration is not permitted if it would significantly impede effective capitation in the common market, or in substantial part of it, particularly as a result of the creation of or the strengthening of a dominant position.


The Commission’s decision is based on an analysis of the relevant market in order to consider whether there is a significant impediment to competition with reference to the criteria in Articles 101 and 102 of the EU Treaty.

The Commission has published guidelines on horizontal mergers and non-horizontal mergers.  The guidelines indicate that dominance as a result of the concentration/merger will be a central consideration  Similar provisions apply to both horizontal and non-horizontal mergers.

The Commission considers the relevant market and its competitive structure. Issues may arise as to what is the relevant market.

Market Share

The Commission will consider market shares to calculate the overall concentration.  If the combined shares are less than 25 percent of the relevant market, there is unlikely to be a dominant position. Another useful tool which is employed is the Herfindahl–Hirschman Index (HHI).

This is the sum of the squares of the market shares of the firm.  The difference between the post-merger and pre-merger index shows the potential impact.

As a rule of thumb, where the post-merger index is less than 1,000, there is less likely to be an objection. Where the post-merger index is between 1000 and 2000 and the change post-merger relative to pre-merger (delta) is less than 250, competition issues are unlikely to arise in the absence of other special considerations.

If the index is above 2000 with a delta of more than 250,  the Commission will look at whether the merger might eliminate constrain on a  firm and may change the nature of the competition so that market participants are more likely to coordinate their practices or practise cartel-like behaviour.


Horizontal guidance refers to several factors which are taken into account

  • whether  the firms have greater market share,
  • whether they are close competitors;
  • whether there is limited possibility of customers changing suppliers;
  • whether supply is likely to decrease;
  • the effect of the merger on potential competitors.
  • whether prices may increase where the merged entity can restrict expansion by competitors or where it eliminates an important competitive force;
  • whether it will increase buyer power upstream
  • whether there are other factors militating against buyer power in the market;
  • whether entry is sufficiently easy into the market to ensure competitive constraint after a merger.


There are a number of possible defences which may be considered by the Commission, which are set out in the guidelines.  They are more in the nature of quasi-defences as they are factors that might lead towards a finding of compatibility with competitive requirements.  It may be possible to prove that the level of efficiency produced by the merger outweighs competition risks.

The efficiencies must be capable of being shown to benefit consumers. The onus is on the party who so claims.  There may be, for example, an improvement in research and development or a reduction of overheads.  However, the generation of efficiencies may not be enough where the benefit does not clearly outweigh the detriment.

There may be a “defence”, if it can be shown that a firm would otherwise fail, but for the merger, One or both firms may be failing firms if the market is depressed.  If a firm fails, the degree of competition which be lessened. It must be shown that the failing firm is likely to leave the market in the absence of the merger and that no less anticompetitive option exists.

It has been suggested that mergers be permissible on the basis that the merged entity might attain standards of excellence and might become European champions in their field. Alliances and joint ventures may be permissible on this basis.

A concentration may be objectionable on the basis that post-completion, there would be a strengthening of collected dominance.  This may occur in oligopolistic situations, where a small number of entities collectively have a dominant position.  It must be shown there is potential for coordinated anticompetitive behaviour after the merger.

Vertical Mergers

Vertical and conglomerate mergers are less likely to directly impact on competition.  However, they may open the possibility of using power in one market to foreclose competition in other markets.

Commission guidelines note that such mergers may lead to efficiencies but may, in certain contexts, impact on the incentive to compete for the merged companies and their competitors to the detriment of consumers.  Foreclosure might occur if the entity post-merger has significant market power.

Detriment to consumers may arise where entities at a lower tier in the distribution chain may be supplied on less favourable terms and conditions, causing an increase in prices.  This may occur if the merging entity has significant power upstream in the market.

When a supplier merges with the downstream customer, which has market power, it might make it more deemed difficult for competitors upstream to obtain sales for their output. It might thereby reduce competition upstream.

The merger may make anticompetitive behaviour easier, where the market is more easily monitored. The post-merger entity may be able to use market power from one market in order to foreclose competition in another market by tying and linking the sale of products.  Tying may be legal or arise from practical or technical factors.

Joint Ventures

Joint ventures raise potential competition law issues. Joint ventures differ in their nature.  Some joint ventures may be equivalent to a concentration or merger in that the joint venture merges and supplants two previously competing entities.

Other joint ventures may be more limited. They may be for research and development purposes or for a new venture, which would not otherwise be sustainable.

The EU Commission recognises that joint ventures and strategic alliances may enhance European industry in the global market.  The Commission is willing, in principle, to approve beneficial joint ventures.

A full joint venture will be treated as a concentration for the purpose of the regulation, where all functions are involved.  In this case, if it has all the characteristics of a separate self-sustaining business, independent of the participants and is capable of operating on its own, on a sustainable basis. A  joint venture which merely facilitate anticompetitive behaviour and coordination by parents is likely to be incompatible with the common market.

The Commission considers whether parents undertake,to a significant extent, activities in the same market as the joint venture or in a downstream, upstream, a neighbouring or closely related market.  They consider whether coordination might arise as a consequence of the creation of the joint venture and affords the possibility of eliminating competition in respect of a substantial part of the products and services in question.


Decisions of the Commission may be reviewed by the court in accordance with a quasi-judicial review procedure.  The entity challenging must have a direct and individual concern in the matter.

This will include the parties and, in some cases,  third-party such as competitors.  The grounds are set out in a separate chapter.


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