CMA teams up with Australian and German authorities to tackle problematic mergers
The Competition and Markets Authority (CMA) has teamed up with its Australian and German counterparts to better enforce mergers, with healthy competition crucial to post-pandemic economic growth.
The CMA, the Australian Competition and Consumer Commission (ACCC) and Germany’s Bundeskartellamt have signed up to a statement which said that “without strong merger control regimes, there is a risk that mergers will proceed that lessen the level of competition by weakening competitive constraints and in some cases strengthening dominant positions.”
Designed to bring some clarity to businesses, advisers, courts and governments, it comes as market dominance, competition and their impacts on small and medium enterprises (SMEs) have crept to the forefront of discussion over the pandemic.
“As our countries emerge from the coronavirus pandemic, competition will have a crucial role to play in helping our economies grow,” CMA CEO Andrea Coscelli, said.
“The economic evidence consistently shows that competition is vital for innovation, productivity and sustainable long-term growth and jobs. I also hear directly from UK businesses who have found themselves in very difficult positions after problematic deals are cleared; some unable to survive because they can no longer compete.”
Big Tech
Much to the dismay of prospective mergers like crowdfunding platforms Seedrs and Crowdcube, it marks a potentially fairer era of business around the world.
In digital markets, merger control will scrutinise the likelihood of future competition concerns and preventing problematic mergers.
“We see particularly strong market concentration in the digital economy. Further takeovers and mergers can cause tipping in the market or create ecosystems which are almost incontestable for competitors,” president of the Bundeskartellamt, Andreas Mundt, noted.
The statement added that “it can be very difficult, and in some cases impossible, to reverse the loss of competition by taking enforcement action after a merger has taken place.”
“Equally, it can take considerable time for markets to adjust to recover the competition lost through a merger.”
The authorities have also set out their view that blocking such mergers is more likely to preserve competition than behavioural solutions.
Impact of Covid-19
The blow the pandemic has had on not only the UK’s economy, but economies around the world have been immense.
At such a time, standards could be relaxed to make way for ‘smoother’ business. However, the authorities warned against this.
“While it is conceivable that the pandemic could lead to an increase in valid failing firm claims, the pandemic is not a reason to lower the standard for accepting such claims.”
ACCC chair Rod Sims, added: “We know that once market power is gained from a merger, it is very difficult to restore competition with our other competition enforcement tools, making it crucial for us to use merger control more effectively.”