Contents of module
- Competition
- Introduction
- Terminology
- Basic Principles
- Competition Requirements
- Competition Laws
- The Regulator’s Role
- Complaints
- Mergers, Acquisitions and Investments
- Miscellaneous Issues
- Appendix I
- Appendix II
- eLearning main Index
Section 8: Mergers, Acquisitions and Investments
Reasons for Concern
The role of a regulator is two-fold:
- to encourage competition to develop; and
- to progressively reduce regulations so that the market can operate under free-trade principles.
That all seems clear enough. The problem being encountered in a number of countries is that the stronger telecom companies are merging with, or buying a stake in, their competitors, thus undermining the work accomplished in developing competition.
This is usually not too much of a problem in a country that has strong and effective antitrust legislation. Unfortunately, this is not always the case. There are examples of countries spending many years and a great deal of effort in introducing competition, and this being largely wasted when subsequent commercial arrangements effectively re-establish the original monopoly situation.
Powers of the Regulator
This problem raises questions about the extent of the powers regulators should have to disallow mergers, acquisitions and investments that reduce or eliminate competition.
Many regulators have taken the view that proposals for such activities should be assessed using the following principles:
- a permissive approach should be taken. Proposals should be allowed unless the regulator can prove that significant limitation of competition will result;
- only the most significant proposals, the ones most likely to pose a threat to competition, should be subject to advance notification;
- however, the regulator should still have the power to reject all proposals, even those where advance notification is not required;
- the same competition test should be applicable to all proposals, whether or not advance notification is required; and
- to eliminate the uncertainty of possible rejection, companies should be permitted to give advance notification of all proposals on a voluntary basis.
Further Reading
The problems with mergers gain a further dimension when they involve companies from different countries. If the competition rules in the two countries differ, the question arises as to which rules should apply.
The matter is one of particular concern for the European Commission (EC) which has 15 member countries whose rules differ. Also, it has the problem of assessing the effect of mergers and acquisitions that are planned between countries based in one or more of its own member countries and in countries elsewhere.
One of the latest pronouncements on this matter was made at the EC’s Tenth Anniversary Conference in September 2000. The speech, by the EC’s Director General for Competition, is contained in Assessing International Mergers: the Commission’s Approach.