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Merger Clearance: An Uncertain Outcome In A Global Market

2097 words - 9 pages

I. Introduction
As time progresses globalization makes the world a smaller place and large companies become more active engaging business in international markets. New technologies combined with investment friendly laws facilitate the expansion in of these companies. Among the common means of attaining a position in the globalized market, companies often merge and face multijurisdictional challenges. Parallel to this entrepreneurial conduct on behalf of the multinational corporations, as part of a global tendency countries are highly involved in enacting competition laws. As a rule the competition laws are territorial as to protect the markets within each sovereign nation; however they ...view middle of the document...

An overview of the United States and European Union merger control standards will be made, identifying the basic difference that may produce conflict in the outcomes of a merger notified within both systems. The General Electric and Honeywell merger attempt will be analyzed to illustrate the deficiencies in the procedures and standards applied to approve or block a merger within these two jurisdictions. As time passes more and more transnational transactions occur and business consolidations will evolve to create solid economic blocks to provide an optimal and efficient market. The conflict of laws, especially with competition that claims extraterritorial jurisdiction, in merger issues must be resolved to avoid delays in innovation and entrepreneurial conduct.
Multinational corporations are the target for competition authorities worldwide. The competition laws in the US and EU review if the proposed merger will reduce competition by allowing the combined firm to increase price or decrease innovation on any group of products or costumers. The test standard for review in each is not necessarily the same, producing uncertainty on the approval of the proposed merger, the same transaction treated differently on the answering the same question. Merger transactions can be categorized as horizontal, vertical, or conglomerate; a horizontal transaction involves competitors, such as firms operating in the same level in the supply chain. A vertical transaction involves firms operating at different levels in the supply chain for a particular product or service. Transactions that are neither horizontal nor vertical are called conglomerate transactions. Presently the number of competition authorities worldwide sum up to more than 100. It is a real challenge for a transaction to comply with each authority claiming decision power upon it.
II. Legal Framework, Enforcement Authorities and Review Standards in the United States and the European Union
In the United States due to its legal system, we have state and federal antitrust laws. In a similar way in the European Union there are two levels of applicable competition law, the European Union competition law and the member state local competition law. However, the focus will be turned towards the federal competition framework and the EU competition law, since they are the applicable law to the mergers herein discussed.
In the United States the core of federal antitrust law is set out in the Sherman Act, the Clayton Act, and the Federal Trade Commission Act. Specifically, the Hart-Scott Rodino Act (HSR), amending the antitrust laws, establishes the federal premerger notification program, providing enforcement authorities with information about the transaction before it occurs. The HSR specifically mandated that no person shall acquire, directly or indirectly, any voting securities or assets of any other person, unless both persons (or in the case of a tender offer, the acquiring person) file notification...

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