Th3.6: Controlling Mergers

Question 1

In the UK, how are mergers assessed?

Answer 1

in terms of the specific circumstances of each case, considering whether there will be a substantial lessening of competition (SLC)

Question 2

What will the CMA consider?

Answer 2

the likely competitive situation if the merger goes ahead compared to if it does not, and the merger will be approved if its potential benefits are greater than its cost

Question 3

When is a merger investigated?

Answer 3

if it will result in market share greater than 25% or if it meets the turnover test of a combined turnover of £70 million or more

Question 4

What is the aim of preventing two large companies merging?

Answer 4

it is so they do not exploit their own customers by raising prices, offering poorer quality service and reducing choice - it can prevent firms from gaining monopoly power

Question 5

However what is the problem?

Answer 5

very few mergers are investigated each year - the CMA can suffer from regulatory capture and may not have all the information necessary to make a decision