The EU Merger Regulations: Restrictions or Promotion (1997)

1990, the European Union replaced its antiquated merger control mechanism with the Merger Control Regulations (MCR). While its intended goal was to regulate, the actual operation of this law underlined the EU's desire to both encourage European-owned business and the continued unification of the EU itself. This manifestation of the (MCR) has allowed the EU to promote its industrial policy while providing a protective cover for EU nationals. INTRODUCTION Merger (murjer) n. 1. union of two or more commercial interests or corporations. 2. Law. Absorption of a lesser estate, liability, action, right, or offense into a greater one. above definition from Webster's dictionary defines the term merger spans its social, legal, economic, and political implications. It is as though a merger was a comet in the sky leaving no wake in it's aftermath. If this were true, then all of the writers and economists who have spent years debating and discussing mergers would be modern-day Don Quixotes. Yet, mergers are actually extremely complex transactions both in their creation, operation, and effects. This paper will examine the positions currently taken toward mergers by governmental authorities in Europe, especially the underlying attitudes that these authorities have taken toward the creation of mergers. EUROPEAN MERGER ACTIVITY It has been only recently that mergers have achieved the dimension and degree of attention that they have in the United States. Fragmented as Europe has been with over 30 nations occupying an area smaller than the United States, merger activity was minimal until recent years. With ties to national governments and acting in some cases as the instruments of government policy, cartels composed of privatelyowned companies, had been encouraged or even fostered by European states as a means of largely private industrial policy (AntiTrust Bulletin 1982). Socialist governments during the 1950's, 60's, and 70's, emphasized concerns for unemployment, expanding social programs, and establishing national self-sufficiency and therefore promoted monopolies through the creation of government-owned entities or mergers when they tended to support governmental industrial policies. early 1980's saw a change in government philosophy toward a new conservatism with centrist or right-of center parties taking power in many European nations, encouraging business interests to expand their operations. At a 1980 Colloquium on EU antitrust laws, one reporter suggested that, interims of Governmental policies, there has recently been a change towards a conciliatory and more mutually rewarding relationship compared to the antagonism of the 60's (Weiler 1980). Now awash with cash and back on the offensive, European managers are turning to mergers and joint ventures, and takeoversfiercely hostile, as well as friendly (Kirland 1988). In a recent poll 62% of companies declared that they were actively considering merging .... (Kirland 1988) growth of mergers between both EU and non-EU companies has increased dramatically as corporations seek to expand their base, geographically and into other products. Much of this activity was a direct result of the compelling necessity that companies have EU-wide operations to take advantage of the new unified market. Additionally, the increased competition in world and European markets resulting from the expansion of American and Japanese firms has created a second major impetus. The Regulation creates one-stop shopping for antitrust review . . . necessary to create PanEuropean companies fit to compete with their US and Japanese counterparts (Brontman, Alison & Morris, Thomas 1990). Overall, mergers in excess of 1,000 million ECU, within the EC, increased 100% from 1983 to 1987 demonstrating the trend toward more mergers and larger companies. Corporate executives are also tending to use acquisitions to consolidate and boost market share and increase potential economies of scale rather than develop and expand internally. …