THE VOLVO/SCANIA MERGER: An Analysis of the EC Merger Process

Abstract

SUMMARY During the last few years activity in the market for mergers and acquisitions has reached unprecedented levels. Corporations are creating ever larger entities with operations which are truly global in nature. The ten largest mergers in history were announced in 1998 and 1999 alone. Examples include the merger between Daimler/Chrysler and Vodafone/Airtouch. As transactions reach ever increasing sizes companies are facing greater opposition from regulators in relation to the potential negative effect on competition in the markets where they operate. The European Commission has decided to block a number of high profile transactions in recent times for this very reason. Some of the most notable examples include General Electrics proposed acquisition of Honeywell, the merger between SEB and Föreningssparbanken and the merger between Volvo and Scania. The basis for merger analysis in EU competition policy is Council Regulation No. 4064/89 which came into force on September 21, 1990 and created the Merger Task Force. It refers to concentrations with a Union dimension, which are assessed in combination with their compatibility with the Common Market. EC Merger Regulation is designed to prevent the negative effects, which are related to changes in the competitive structure of the market. A transaction is prohibited when it has sufficiently negative effect on competition. If there is no increase in the market share as a result of the concentration, there will accordingly be no significant impact on the market and the merger will most likely be approved. This essay will describe the Merger Process from a theoretical perspective, as well as from a practical perspective, including an extensive description of the process of defining the relevant markets and all of the stages in the market investigation of the Volvo/Scania merger case. The study is an attempt to highlight the different types of aspects of the arguments presented in the Volvo/Scania merger case, and will conclude that the legal arguments in the presentation of the merger analysis are in a great extent based on economical facts and assessments. This conclusion goes well with the tendency that competition law arguments indeed differ from traditional legal argumentations. Following the Volvo/Scania merger decision, a wide discussion was initiated regarding the outcome of the case. It has been argued which type of criteria laid the ground for the decision, how these criteria were assessed by the Commission and further which type of criteria ought to be assessed in a merger investigation. The fact that only a certain type of arguments are accepted as being part of a merger process, relates to the assumption that arguments featured in legal arguments, such as in the EC Merger Process must meet certain criteria in order to be approved of and allowed to form the basis for a decision. The standards presumed to be met in order to be accepted as part of the legal discussion in this study are: comprehension, sustainability, relevance and objectivity. The study concludes that the arguments used by the Commission in its final decision, do meet the above listed standards and accordingly seem to contribute to the decision having been made on fair conditions.