European Union merger law is a part of the law of the European Union which regulates whether firms can merge with one another and under what conditions. It is part of competition law and is designed to ensure that firms do not acquire such a degree of market power on the free market so as to harm the interests of consumers, the economy and society as a whole.
Mergers and acquisitions are regulated by competition laws because they may concentrate economic power in the hands of a smaller number of parties. Oversight by the European Union has been enacted under Merger Regulation 139/2004, known as the "ECMR". The law requires that firms proposing to merge apply for prior approval from the Commission, specifically mergers that transcend national borders and with an annual turnover of the combined business exceeds a worldwide turnover of over EUR 5000 million and Community-wide turnover of over EUR 250 million must notify and be examined by the European Commission. Merger regulation thus involves predicting potential market conditions which would pertain after the merger. The standard set by the law is whether a combination would "significantly impede effective competition... in particular as a result of the creation or strengthening of a dominant position..."
One reason why businesses may be motivated to merge is in order to reduce the transaction costs of negotiating bilateral contracts. Another is to take advantage of increased economies of scale.
However, increased market share and size may also increase market power, strengthening the negotiating position of the business. This is good for the firm, but can be bad for competitors and downstream entities (such as distributors or consumers). A monopoly is the most extreme case, where prices might be raised to the monopoly price instead of the lower equilibrium price. An oligopoly is another potentially undesirable situation in which limited competition may allow higher prices than a market with more participants.
Read more about European Union Merger Law: Concentration, Significantly Impeding Competition, Exceptions, Criticism
Famous quotes containing the words european, union and/or law:
“It has become necessary to call the attention of European governments to a fact which is apparently so insignificant that the governments seem not to notice it. The fact is this: an entire people is being annihilated. Where? In Europe. Are there witnesses? One witness, the entire world. Do the governments see it? No.”
—Victor Hugo (1802–1885)
“We must choose. Be a child of the past with all its crudities and imperfections, its failures and defeats, or a child of the future, the future of symmetry and ultimate success.”
—Frances E. Willard 1839–1898, U.S. president of the Women’s Christian Temperance Union 1879-1891, author, activist. The Woman’s Magazine, pp. 137-40 (January 1887)
“They who say that women do not desire the right of suffrage, that they prefer masculine domination to self-government, falsify every page of history, every fact in human experience. It has taken the whole power of the civil and canon law to hold woman in the subordinate position which it is said she willingly accepts.”
—Elizabeth Cady Stanton (1815–1902)