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Competition
in the economy has many benefits – efficiency, low prices, and innovation are
some examples in which the society can profit from a free market.  But by taking over or merging with another
company, competition can be reduced. Therefore, the European Union introduced
laws which regulate competition within the European Single Market. Merger
Control is one of those instruments. It seeks to prevent substantial
disruptions of free and unhampered competition through excessive concentration
of entrepreneurial power.

In
the following I will describe the Regulation 139/2004. Details of the
regulation can be found under “Legislation”. Relevant to the chosen topic, two
cases have been examined to represent and clarify the regulation.

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I.           
Legislation

The
regulation 139/2004 clarifies the rules for merging and acquisition between
companies. The investigation is activated when the European Commission or a
company is notified prior to the implementation of the merger. It prohibits
those mergers and acquisitions which could reduce competition essentially in
the Single European Market. Generally, it can be said that a newly merged
company which could increase prices for consumers could be prohibited.

For
a transaction to come within the ambit of EU merger control it must qualify as
a concentration and involve parties that reach certain turnover thresholds.
Concentrations are defined as transactions that involve a lasting change in
control because either:

·        
Two or more previously independent
undertakings merge

·        
One or more undertakings aquire
directly or indirectly control of one or more other parties by the following
means: purchase of securities or assets or contract

·        
Two or more parties create a
full-function joint venture

Thresholds
are met when both:

·        
Combined worldwide turnover of the
undertaking party exceeds 5 billion Euros

·        
Group turnover of each of at least
two of these undertaking parties exceeds 250 million Euros in the EU

The
secondary threshold is met when:

·        
The combined worldwide turnover of
the undertaking exceeds 2.5 billion Euros

·        
In each of at least three member
states, the combined turnover of the undertakings concerned exceeds 100 million
Euros

·        
In each of these member states, the
turnover of at least two of these undertakings exceed 25 million Euros

·        
The group turnover of each of these
undertakings exceed 100 million Euros in the EU.

 

For
the merger is mandatory to notify concentrations within an EU dimension to the
European commission. Since there have been demands for flexibility,
concentrations can be notified as early as the parties show intention to
conclude an agreement.

Once
formally notified, the Comission has 25 working days to examine the
concentration in Phase 1. The deadline examination only commences, once the
notification process has ended. The examination is based on the information
provided by the parties. Moreover, suppliers, customers and competitors are
also invited to comment on questions. If the examination does not raise any
competition issues, the European Commision will draft a decision for review
within 17 working days. If the Comission considers that remedies are necessary,
it will tipically inform parties within 15 working days. This gives parties
time to propose remedies and for the Comission to test the proposals on the
market. If the parties submit remedies, the Phase 1 deadline will be extended
to 35 working days. At the end of Phase 1, the Comission can decide on the
following:

·        
The Merger Regulation does not apply

·        
The concentration is unconditionally
cleared

·        
Clearence is granted subject to
commitments

·        
Phase 2 is opened because of “serious
doubts” as to the compability of the concentration with the EU market

If
Phase 2 is opened, the Commission has at least 90 further working days to
examine the concentration. This period can be extended by 15 working days where
the notifying parties offer commitments. With the parties’ consent, it can be
extended by up to 20 working days.

At
the end of Phase 2, the Comission may decide on the following:

·        
The concentration is unconditionally
cleared

·        
Clearance if granted to commitments

·        
The transaction is prohibited

 

 

 

 

 

 

 

 

 

 

 

 

   
II.           
Case
No COMP/M.5157 – VOLKSWAGEN / SCANIA

On
the seventh May of 2008 the European Comission received a notification of a
proposed concentration by which Volkswagen AG aquires control of Scania AB by way
of purchasing shares on the stock market. Volkswagen, as the undertaking party,
is a German automotive manufacturing company. Scania, a Swedish automotive
industry manufacturer of commercial vehicles. Both parties are not institutions
but companies of the European Union. The commission examined the impact of the
proposed transaction on the markets for heavy goods vehicels, buses, chassis
and diesel engines. The merged entity then would have a large market share in
some national markets for heavy goods vehicles and would by that be the market
leader in Europe. In terms of buses, the merged entity would be the second
largest supplier in Europe and be market leader for some certain engiges in the
national states. However, the Comission’s investigation revealed that, in the
European heavy-duty truck and bus markets, there was still sufficient
competition from well-established suppliers, such as Daimler, Volvo and Iveco.
Moreover, the vast majority of competitors and customers confirmed to the
Comission confirmed that the markets for Buses and heavy trucks would not
change majorly. Subsequently, the investigations of the European Comission
showed that the transactions would not have any competition effects on the
competition in the Single EEA, as in most cases the parties products do no
compete directly with each other. After examination of the notification, the
European Commission concluded that the operation fell into the scope of the
Council Regulation (EC) No 139/2004 and does not raise doubts as to its compatibility
with the common market and with the functioning of the EEA Agreement. This case
is appropriate to use for this essay because it gives a clear example of
merging and aqusitioning between companies within the European Single Market.
In this case, the merger shows that is does not show serious doubts with the
common market.

 

 III.           
Case
M.8124 – Microsoft / LinkedIn

On the 14th of October 2016, the European Comission received
notification of a proposed concentration by which the undertaking Microsoft
Corporation acquires LinkedIn Corporation by way of purchase of all shares. Microsoft
is a global technology company, whose product offering includes operating
systems for personal computers, servers and mobile devices. LinkedIn operates a
professional social network and generates revenues through different product
lines. The commission focused on three areas: professional social network
services , customer relationship management software solutions  and online advertising services. The Relevant
markets were not only EU-wide but in different cases also on an international
level. The commission considered two ways in which combining the parties
respective datasets relating to online advertising could harm competition.
Combining datasets can increase the parties market power in the supply of data,
or increase barriers to entry for actua or potential competitors that need the
data to compete, thus reducing competiton. The Comission dismissed these
concerns, noting that Microsoft and LinkedIn had a limited presence in online
advertising and did not compete closely. The Comission also considerer wether
Microsoft, would be able to foreclose its CRM competitors by gaining access to
LinkedIns dataset. Prior Prior to the transaction, LinkedIn licensed sales
intelligence solutions to third parties, including CRM suppliers. LinkedIn’s
sales intelligence product comprises only a part of its full internal dataset,
which it did not license to third parties and did not intend to license in the
future. The Commission considered whether or not access to LinkedIn’s full
dataset would nevertheless become essential for other CRM suppliers to compete
post-merger, but rejected this concern. It reasoned that LinkedIn’s full
dataset would be only one of many alternate solutions available and that CRM
suppliers competed without it. The Commission also rejected related concerns
that Microsoft would foreclose access to LinkedIn’s existing sales intelligence
product, or bundle it with its own CRM product, finding that Microsoft lacked
the ability and economic incentive to do so. The last concern of the Comission
was the risk that Microsoft could integrate LinkedIn features within its own
productivity software and deny similar levels of integration to competitors of
LinkedIn. To address the Commission’s concerns about foreclosure, the parties
committed to:

·        
Ensure that PC manufacturers and
distributors would be free not to install LinkedIn on Windows and allow users
to remove LinkedIn from Windows, should PC manufacturers or distributors decide
to preinstall it.

·        
Refrain from retaliating against any PC
manufacturer for developing, using, distributing, promoting, installing or
supporting a Windows PC application for competing PSN providers.

Finally, the  decision was made in
accordance with the relevant legislation and the Commission accepted the
commitments and approved the aqucition.

 

 
IV.           
Conclusion

The
two cases above show that the merging and acquisitioning between companies is
an ongoing procedure in a globalized economy to get ahead of other competitors.
At least in theory, mergers create synergies and economies of scale, expanding
operations and cutting costs. The case of Scania and Volkswagen shows how these
synergies can be created. The same will happen to Microsoft and LinkedIn even
though I do not like the merger. In my opinion, this merger will reduce
competition as it will gather information for itself. The backoffices will
start sharing data even though publicly these will be negleceted.

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