The Significant Impediment of Effective Competition Test in the New European Merger Regulation: In Theory and Practice

• DOI: https://doi.org/10.1016/S0573-8555(06)82013-4
• Pages: 349-367
• Date: 01 April 2007
• Published date: 01 April 2007
• Author: Jérôme Foncel,Valérie Rabassa,Marc Ivaldi

CHAPTER 13

The Significant Impediment of Effective

Competition Test in the New European

Merger Regulation: In Theory and

Practice1

Jérôme Foncela,MarcIvaldi

band Valérie Rabassac

aGREMARS, University of Lille 3

bUniversity of Toulouse,EHESS and IDEI, Toulouse, France

cEuropean Commission, Chief Economist Office, DirectorateGeneral for Competition

Abstract

In recent years, the EC competition authorities have increased their interest for

empirical methodology in particular to study potential anti-competitive harms

arising from mergers. These developments havebeen shaped by a higher interest

dedicated to unilateral effects. The new EC Merger Regulation(2004) has incor-

porated the “significant impediment of effective competition” test which gives

more weights to the competitive effects of a transaction. The recent highlighted

media case Lagardère/Editis (2004) can be considered as the first empirical il-

lustration of this new test.

13.1. Introduction

The new EC Merger Regulation (2004) incorporates a new test to check whether

a concentration or a merger between undertakings would constitute a “Sig-

nificant Impediment of Effective Competition, in particular as a result of the

creation or strengthening of a dominant position.”2This test, the SIEC test

herein, is aimed to be an instrument to analyse potential anti-competitive harms

like unilateral effects conducts arising from mergers. The recent highlighted me-

dia case Lagardère/Editis (2004)could be considered as the first case where this

1The views expressed in this article are exclusively the views of the authors and not necessarily

those of the European Commission. ValérieRabassa is member of the Chief Economist Office. She

was representing the Chief Economist in Lagardère/Editis.

2EC Merger Regulation (ECMR) 139/2004.

CONTRIBUTIONS TO ECONOMIC ANALYSIS © 2007 ELSEVIER B.V.

VOLUME 282 ISSN: 0573-8555 ALL RIGHTS RESERVED

DOI: 10.1016/S0573-8555(06)82013-4

350 J. Foncelet al.

test has been implemented by means of an empirical illustration.3,4,5It is also

an example of the application of empirical analysis in a standard investigation.

The objective of this chapter is to present the SIEC test in the context of the

new merger regulation and guidelines, to show how it is implemented in the

Lagardère/Editis case, and from this illustration to understand the scope of the

SIEC test with respect to more traditional tests like the dominance test. Sec-

tion 13.2 discusses the new EC regulatory framework. Section 13.3 examines

the role of the empirical methodology. Section 13.4 present the Lagardère/Editis

case and the empirical analysis developed in the curse of the investigationof this

case. Section 13.5 concludes.

13.2. The EC merger regulation

Since the beginning of the EC Merger Control in September 1990 up to De-

cember 2004, 2648 cases have been notified to the Commission.6Eighty-four

percent of all cases have been cleared without any conditions after a phase I in-

vestigation. Figure 13.1 illustrates the statistics of the EC Merger Control over

76.1(b) decision.

88.2 compatible decision and 8.3 prohibition decision.

Fig. 13.1: Final decisions merger control.

3Case COMP/M.2978.

4On March 2000, the Commission, for the first time, has included in a final merger decision—see

case COMP/M.1672 Volvo/Scania—areference to unilateral conducts. In this case, the Commission

requested an econometric study from Professors Ivaldi and Verboven in order to attempt to measure

directly what the effects of the merger could be on the prices charged by heavy truck producers in

various national markets. However,given the novelty of the approach, the Commission did not base

its assessment on the results of the study, but rather based its analysis on its traditional dominance

test.

5In a companion paper (Foncel et al., 2005) we provide a detailed presentation of the econometric

analysis.

6Note that, on the 2648 notified cases to the Commission, a certain number of cases are out of

scope of the Merger Regulation like 6.1(a) decisions; others (86 cases) have been withdrawn in

Phase I and Phase II (3.24 percent of the total of the notified cases), some cases (3.5 percent of the

total of notified cases) were also refer partially or fully to the member States (9.3 decision), some of

them were also declared compatible because they restore effectivecompetition (8.4 decision). These

statistics are computed by us from data on mergers published on the website of the Directorate

General for Competition of the European Commission.