Glossary term
Merger Control
Subject: Compliance and Regulation, Competition and Antitrust
Merger control is the review by a competition authority of mergers, takeovers and some joint ventures, to decide whether the deal would significantly reduce competition and so should be cleared, changed or blocked.
Explanation
Most jurisdictions require parties to notify a deal if their combined turnover or assets pass set thresholds. In many regimes the deal cannot close until the authority agrees, a rule known as a standstill obligation. Closing early, called gun-jumping, is penalised. The authority defines the relevant market, then asks whether the merged firm could raise prices, cut quality or shut out rivals. Horizontal deals between competitors raise the clearest worries, but deals along a supply chain can too. Most cases are cleared in a first short phase. A few go to an in-depth review, and the parties may offer remedies such as selling off a business unit. The test is worded differently across countries, though the core question is the effect on competition. Deal teams build the filing timetable into the closing date, since one slow jurisdiction can hold up the whole transaction.
Example
Two regional supermarket chains, each with 30% of grocery sales in the same state, agree to merge. The authority's first-phase review finds high overlap in twelve local areas and opens an in-depth investigation. The chains agree to sell stores in those areas to a third party, and the deal is cleared on that condition.
Not to be confused with
- Abuse of Dominance
- Merger control looks ahead at a deal before it closes. Abuse of dominance addresses conduct by a firm that already holds power.