BlogEntrepreneurship & BusinessLegal ResourcesMergers: Protecting the Market From Unfair Competition

September 9, 20210

In a previous blog post, we have mentioned the merger of companies as a legal process that might result in one entities’  unfair dominance in the market.

What is a Merger?

 A merger is a steady change of control due to:

  • The merger of two or more undertakings, or parts of undertakings – which, at first, were independent of one another
  • The gain of direct or indirect control by one or more persons, who have in the same time control of at least another enterprise, by acquiring the controlling parts of another undertake
  • The behaviour of a new joint company as an independent economic unit in the market.

 

A merger can be attained by:

  • Buying the assets of an enterprise
  • Buying voting rights of the governing bodies of an enterprise.

 

Is a merger illegal?

Not at all! The law does not prohibit the merger of companies. However, it requires from the Authority for Competition to exercise due diligence on these actions. 

Pursuant to the law, the Authority has the competence to give authorization for the merging process, only if:

  • The turnover of at least one of the participating companies in the internal market is more than 200 million ALL, and
  • The turnover of all participating companies together in the international market is more than 7 billion ALL.

Or:

  • The turnover of all participating companies in the internal market is more than 400 million ALL, and
  • The turnover of one participating company is more than 200 million ALL.

The companies should notify the authority within 30 days from the date they agree on the merger.

 

Is the notification mandatory?

Yes, otherwise the merger is considered invalid. Also, except being notified, the Authority should give its authorization on the process for it to be legally valid. The latter is given when the following  legal conditions are met:

  • The merger will provide economic efficiency.
  • The merger will increase consumers’ welfare.
  • These economic efficiencies will only result due to this merger.
  • Economic efficiencies must be verifiable.

However, the law stipulates an authorization for a temporary merger when there exists a coercive reason. Either to stop a serious and irreparable harm risking the participating companies or third parties. 

In any case, it is up to the Authority to decide after examining all the possible outcomes. 

To such a degree, a merger is not ipso facto an entity created to demolish the market’s balances or go defraud the law.

The purpose of our legislator is to support the free market economy while protecting the legal interests and welfare of its citizens.

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