All mergers, which are reported to The Сomission, are subjected to see if they would significantly prevent or block effective competition in the EU. The regulation prohibits mergers and acquisitions that would significantly reduce competition in the single market, for example, if they created dominant companies that can raise prices for consumers. Proposed mergers may be prohibited, if the parties involved in the merger are major competitors or if the merger otherwise would significantly weaken effective competition in the market, in particular by creating or strengthening the dominant player.
The jurisprudence of the CFI/ECJ (97) states that the analysis is facilitated by looking at a certain number of criteria which are summarised in Annex II of the framework Directive, which has also been used by the Commission in applying the notion of collective dominance under the merger control Regulation. According to this Annex, ‘two or more undertakings can be found to be in a joint dominant position within the meaning of Article 14 if, even in the absence of structural or other links between them, they operate in a market, the structure of which is considered to be conducive to coordinated effects.
In this particular case of Arcadium's acquisition of Shaolin, the Commission is able found that the merged entity would have joint control of two telecommunication operators. Given that entry into the market was highly regulated, in the sense that undertakings had to obtain a license and access to radio frequencies, which are allocated by the national telecommunication regulator through a tendering and bidding process, it could not be ruled out that such factors could lead to the emergence of a duopoly conducive to coordinated effects (119).
It is also important to note that the acquisition of a breakthrough innovator reduced the competitive environment in the telecommunications market, which made Arcadium an owner of 40%. Based on this the merger has negatively affected these favorable conditions that were in the market of telecommunications.
Should the European Commission clear or block the merger? Articulate clearly why the merger is likely to produce harmful or beneficial effects on the competition.
The EC should block the merger. The merger would create the largest mobile operator in Arcadium and would result in a highly concentrated market structure. If the deal had taken place, there would have been two major mobile operators. Between them would be about 40% of the market. Another important fact in assessing the merger is the high quality of the network, which can be achieved without compromising competition. This merger can have an anti-competitive unilateral effect in all areas, from private to wholesale buyers. In turn, the company claims that the acquisition of Shaolin will allow it to accelerate the nationwide rollout of the next generation of mobile telecommunication networks which will offer consumers stronger and faster internet connectivity. However, even if changes were made, the Commission could not see how the benefits to consumers outweigh the expected price increases caused by the loss of competition.
Which remedies, if any, could the European Commission require from the parties before clearing the merger?
According to EU Merger Control (Council Regulation (EC) No 139/2004), If the commission fears that a merger could significantly affect competition, Arcadium and Shaolin may suggest specific changes to the project that would guarantee continued competition in the market. If remedies are accepted, they become mandatory for companies. An independent trustee is then appointed to monitor compliance with these obligations. In this particular case, remedies would be a deprivation of telecommunications assets. Deprivation of property guarantees further competitive behavior in the market.
In foreign economic literature, a clear distinction is made between the chains initiated by producers and buyers. Global chains initiated by producers are usually concentrated in knowledge-intensive industries such as semiconductors and pharmaceuticals. As these industries are characterized by the use of the latest technologies and high R&D costs, the leading companies in these industries occupy the top floors of the chains and try to control the design process and most of the production operations scattered around the world. In buyer-initiated chains, production is controlled by retailers and brand owners; it can be fully outsourced and the focus is on marketing and sales. This is how global value chains with low capital and skilled labor needs (e.g. apparel production) are organized.