Efficiency Gains from Mergers (original) (raw)
The purpose of this chapter is to contribute to the analysis of two questions. Should a merger control system take into account efficiency gains from horizontal mergers, and balance these gains against the anti-competitive effects of mergers? If so, how should a system be designed to account for efficiency gains? There are several reasons why efficiency gains from horizontal mergers are an important issue today. Business conditions are changing rapidly, for example as a result of the internal market, increased global competition, and the deregulation of many industries. The consequent need to adapt the industry structure has generated a wave of mergers in Europe as well as in the rest of the world. The current wave is of historical proportions. All mergers with a so-called Community dimension must be notified to the Commission and are subsequently reviewed under the Merger Regulation 1. According to Articles 2(3) of the Regulation, a concentration which "creates or strengthens a dominant position as a result of which effective competition would be significantly impeded" shall be prohibited. Otherwise it shall be allowed. According to Article 2(1)(b), the Commission shall, in making this appraisal, amongst other things take into account "the development of technical and economic progress provided that it is to consumers' advantage and does not form an obstacle to competition". The latter clause has triggered a debate whether the Merger Regulation allows for a so-called efficiency defence. Can important cost savings (or other efficiencies) save an otherwise anti-competitive merger? The Commission has, in policy statements, argued that, "(t)here is no real legal possibility of justifying an efficiency defence under the Merger Regulation. (Commission, 1996)" Many economists, starting with Williamson (1968), have argued that competition authorities should take efficiency gains into account. 1 All references to the Merger Regulation in this chapter are to the old Regulation no. 4064/89.
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