The regulation of mergers and acquisitions is an integral part of state policy for the support of competition and the development of an efficient market. A balanced approach to the regulation of transactions is essential, especially in order to support the competitive process, prevent monopolies in the economy and abuse of dominance by companies. However, in regulating these processes, the state should not lose sight of the second challenge. It is about creating favorable conditions for the formation of large national companies. In the context of increasing globalization support of competition must be balanced, ensuring the implementation of both these tasks.
The main issue in such a situation is to what extent the state should regulate the M&A of companies and what conditions of practice should be carried out in order to achieve a balance in both economic and legal aspects.
The purpose of this paper is to reflect approaches to mergers in two different countries: in the US and in the EU. In practice, the US and the EU have accumulated significant experience in implementing effective measures to counteract the manifestations of monopoly in the economy, as well as to maintain companies capable to demonstrate high competitiveness for a long time in the relevant sectors of the national and world economy. While analyzing merger and acquisition management measures, it is necessary to take into account the interrelationship between different forms and directions of competition policy and at the same time the independent significance of each of these directions.
Regulation of mergers and acquisitions and the formation of a competitive environment in the United States
As for the United States, this country has the longest history of mergers, which dates back to the 1890s (Sudarsanam. 2003, p.14). Direct legislative regulation of M&A transactions has historically been associated with the adoption in 1914 of the antitrust law of Clayton (Clayton Antitrust Act), which introduced a General Legal norm in this regard (Art. 7). Under this rule, any merger transaction that could significantly limit competition should be illegal. However, the dubious practice of applying the legislation on mergers led to the adoption in 1950 of the law of the Celler-Kefauver Act, which was toughened article 7 of the law of Clayton. The content, as well as the practice of applying this new legal document, corresponded to the General policy of tightening the Antimonopoly legislation at that time (Carlton, 2005, p. 657-659).
In the subsequent more than forty years (1968-2009), the following main events took place and the corresponding trends were manifested in the field of regulation of the M&A market. In 1968, the U.S. Department of Justice issued special merger Directives (Merger Guidelines) that firms were required to follow in order to avoid the risk of prosecution. In the overall assessment of horizontal mergers, it was emphasized that such transactions are a significant dynamic force in the U.S economy. This legislation was based on the analysis of market structures and, in particular, on the assessment of the level of concentration of the first four firms in the industry (i.e. the CR4 index). The essence of the restrictions in practice was that if the CR4 concentration index in the industry where the merger was supposed to exceed 75%, and the total share of the two companies was more than 10%, then it was sufficient for the government to question the feasibility of such a transaction. However, in practice, the judiciary, issued the opinions on M&A transactions, soon after the adoption of the Directive of 1968 began to depart from compliance with these strict requirements. This was greatly facilitated by their harsh criticism from a number of specialists (Gaughan, 2010, p. 126).
The revised merger Directives adopted later in the United States (in 1984, 1992 and 1997) were characterized by a departure from strict antitrust policies and recognition of the potential effectiveness of mergers. Thus, the 1992 Directives, revised in 1997, were based on the fact that most of these transactions are not accompanied by damage to consumers, but on the contrary, can bring them significant benefits in the form of lower prices, improving the quality of goods and services, increasing investment in innovation. It was also emphasized that the likely result of such transactions is the improvement of the competitive position of the new company in the national and other markets.