Competition law seeks to ensure a fair marketplace by prohibiting unfair conduct that seeks to gain a greater market share than would be realised through effective competition. Mergers and acquisition transactions are likely to have anti-competitive effects as such transactions may make it difficult for smaller companies to enter or succeed in any market. Such transactions can also lead to higher consumer prices, reduced quality in services and prevent innovation. Hence, the need for merger control.
Merger control refers to the procedures used in reviewing mergers and acquisitions in relation to competition law. The purpose of merger control is to enable competition authorities determine, on a forward-looking basis, whether a transaction would have a detrimental effect on market competition. In assessing a transaction, the competition authority seeks to determine whether the relevant transaction will cause a significant impediment on effective competition, a significant reduction in competition, or the creation of a dominant position.
Merger control differs from other forms of competition control such as dominant position, abuse supervision, regulation of restrictive agreements and price regulation. This is because in other forms of competition control, the behaviour of companies is regulated retrospectively, whilst with merger control, the regulation is prospective in nature.