The SIEC (“significant impediment to effective competition”) test is the cornerstone of merger control. A concentration is only allowed if it does not significantly impede effective competition in the internal market or a substantial part of it, in particular as a result of the creation or strengthening of a dominant position.

Several factors are taken into account in the analysis: the degree of concentration of the market on which the transaction takes place, the high level of market share held by the parties; the fact that the parties are close competitors, that customers have few opportunities to switch suppliers, that competitors are unlikely to increase output if prices increase, that the merged entity would be able to limit the development of competitors through, for example, control of a resource or distribution channel, ownership of a patent or trademark, or increased financial power, or that the transaction eliminates an important driver of competition, such as an undertaking selling innovative products, even if its market share is relatively small.

Then, those factors are weighted against countervailing factors such as the purchasing power of customers or the relative level of barriers to entry, as well as possible efficiencies resulting from the concentration, to establish the competitive balance of the merger. Where the transaction takes place in a concentrated market, the Commission assesses the possible existence of coordinated effects. Finally, the European authorities apply the “failing firm doctrine” in the specific case of mergers aimed at the acquisition of undertakings in difficulty.