This chapter provides an overview of competition policy, competition law and its economic context. Section 2 describes the practices that competition laws attempt to control in order to protect the competition process. Section 3 examines the theory of competition and gives an introductory account of why the effective enforcement of competition law is thought to be beneficial. Section 4 considers the goals of competition law. Section 5 introduces two key economic concepts, market definition and market power, that are important to a better understanding of competition policy. The chapter concludes with a table of market share figures that are significant in the application of EU and UK competition law, while reminding the reader that market shares are only ever a proxy for market power and can never be determinative of market power in themselves.
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1. Competition policy and economics
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20. Mergers (1): introduction
This chapter briefly discusses the subject of merger control. Merger control is an important component of most, though not all, systems of competition law. Merger control has been under particular scrutiny in recent years, partly as a result of the rapid development of digital technologies and the emergence of powerful digital platforms. Separately there has been a certain backlash against the trend towards the globalisation of markets, and national governments, as well as the EU, have considered whether controls over the foreign acquisition of key industries are required, and whether the basic test of merger control – would a merger be harmful to competition? – should be supplemented by broader provisions enabling ‘the public interest’ to be taken into account. Against this background, the chapter begins by explaining what is meant by a ‘merger’ or ‘concentration’, the term used by the EU Merger Regulation (EUMR). It then proceeds to describe the different effects of mergers between independent firms from within and different production levels, the proliferation of systems of merger control, why firms merge, and the purpose of merger control. The final section of the chapter deals with how to design a system of merger control when a country decides, as a matter of policy, to adopt one.
