COMPETITION • FRENCH LAW • MERGERS
A merger may produce unilateral effects resulting from the global loss in well-being (in terms of price increases or production decreases) due to a merger transaction,taking into account the predictable reaction of the main competitors of the participants in the transaction only. In order to assess the likelihood of a risk of unilateral effects, the Competition Authority generally requires that there be a competitive proximity of the parties concerned by the merger and takes into account the unit margins on the variable costs of the undertaking party to the merger towards which a fraction of the demand would switch following a price increase in prices initiated by the other party. A merger can lead to unilateral effects, even if the merging parties are not the closest competitors in the market under consideration, as long as they are sufficiently close competitors – as demonstrated by the significant rate of mutual transfer of customers in the event of a price increase – to constitute a significant source of competitive pressure that will be eliminated by the concentration.
The Competition Authority lists various quantitative tests in its Merger Guidelines – “UPP” (upward pricing pressure), “GUPPI” (gross upward pricing pressure index) and “IPR” (illustrative price rise) which enable an initial assessment of the possibility of a unilateral effect resulting from a concentration without it being necessary to define the relevant market.
