COMPETITION • EUROPEAN AND FRENCH LAW • MERGERS
In order to assess whether the increased stature of an undertaking resulting from a concentration is such as to enable it to acquire market power, the Competition Authority analyzes the degree of competitive pressure existing within the market under consideration as well as the degree to which it is open or closed to the entry of other operators.
The competitive pressure exerted by competitors is assessed taking into account their position and distance from the merged entity, the quality of their offer (the extent of their product range or brand portfolio), their ability to redirect their current offer to compete directly with the products offered by the parties (through the existence of excess production capacity or the analysis of necessary investments) and their incentive to exert active competitive pressure on the parties. In the distribution sector, the French Competition Authority sometimes employs the “scoring” method, which allows for a qualitative assessment of the competitive pressure exerted by the merging parties’ competitors in the catchment area of the target store. In application of this test, only a competitor score greater than 10 makes it possible to rule out the risks of harm to competition. Potential competition represents another element of the competitive assessment. Under the Guidelines on the assessment of horizontal mergers, ” [f]or entry to be considered a sufficient competitive constraint on the merging parties, it must be shown to be likely, timely and sufficient to deter or defeat any potential anticompetitive effects of the merger”. In assessing this competitive constraint, the Commission take into account economic conditions for the functioning of the market or the existence of barriers to entry which, when low, do not give the incumbent undertakings a significant advantage over potential competitors.
The negotiating power of the parties’ customers, their ability to switch suppliers and their purchasing power may also be such as to exert a degree of leverage that prevents the acquisition of market power.
When the supervisory authorities consider that the concentration helps re-establish a competitive equilibrium, notably by “strengthening the position of one of two dominant undertakings, which in the long-term would have found itself in a weaker market position”, they consider that there is no restriction on competition and consequently no need to examine whether the transaction contributes to economic and social progress. If there is no such balancing effect, an evaluation of the merger’s contribution to economic and social progress constitutes the second stage of the process.
Lorsque les autorités de contrôle constatent que la concentration a pour effet de rétablir l’équilibre concurrentiel, notamment en “donnant des armes à celle des deux entreprises dominantes d’un marché [qui se trouve], à terme, dans la position du plus fragile”, elles considèrent que l’atteinte à la concurrence n’est pas réalisée et qu’il n’y a donc pas lieu d’examiner la contribution que cette opération est susceptible d’apporter au progrès économique et social. Dans le cas contraire, l’appréciation de cette contribution constitue la seconde étape du contrôle.