Mergers and Acquisitions

No introduction to antitrust legislation would be complete without addressing mergers and acquisitions. We can divide these into horizontal, vertical and potential competition mergers.

Horizontal Mergers: When firms with dominant market shares prepare to enter a merger, the FTC must decide whether the new entity will be able to exert monopolistic and anti-competitive pressures on the remaining firms. For example, the company that makes Malibu Rum and had an 8% market share of total rum sales, proposed buying the company that makes Captain Morgan’s rums, which had a 33% of total sales to form a new company holding 41% market share.7

Meanwhile, the incumbent dominant firm held over 54% of sales. This would mean the premium rum market would be composed of two competitors together responsible for over 95% of sales in total. The FTC challenged the merger on the grounds that the two remaining companies could collude to raise prices and forced Malibu to divest its rum business.7

Unilateral Effects. The FTC will often challenge mergers between rival firms that offer close substitutes, on the grounds that the merger will eliminate beneficial competition and innovation. In 2004, the FTC did just that, by challenging a merger between General Electric and a rival firm, as the rival firm manufactured competitive non-destructive testing equipment. In order to go forward with the merger, GE agreed to divest its non-destructive testing equipment business.8

Vertical Mergers. Mergers between buyers and sellers can improve cost savings and business synergies, which can translate to competitive prices for consumers. But when the vertical merger can have a negative effect on competition due to a competitor’s inability to access supplies, the FTC may require certain provisions prior to the completion of the merger. For example, Valero Energy had to divest certain businesses and form an informational firewall when it acquired an ethanol terminator operator.9

Potential Competition Mergers. Over the years, the FTC has challenged rampant preemptive merger activity in the pharmaceutical industry between dominant firms and would-be or new market entrants to facilitate competition and entry into the industry.

Antitrust law

Presented by Romano Pisciotti

Romano Pisciotti


“In its judgment in Case C-59/19 Wikingerhof the CJEU has ruled that a hotel using the platform may, in principle, bring proceedings against before a court of the Member State in which that hotel is established in order to bring to an end a possible abuse of a dominant position. According to the Court, in so far as such an action is based on the legal obligation to refrain from any abuse of a dominant position, it is a matter relating to tort, delict or quasi-delict within the meaning of point 2 of Article 7 of Regulation No 1215/2012 (Brussels Ia).”

To learn more about this and other recent CJEU cases, join ERA’s Webinar on Latest Developments in EU Antitrust Law on 10 December 2020.


Presented by Romano PIsciotti

Creative destruction

How Antitrust Regulation Hinders Innovation and Competition

Few economic concepts elicit such strong reactions as that of monopoly, and the policy intended to address it—antitrust regulations (called competition policy in the European Union). Yet, both supporters and opponents of antitrust regulations agree on one fundamental point—that effective competition is vital to the American economy and the welfare of its citizens. However, they differ in how the law should encourage this. There are essentially three schools of thought regarding antitrust policy:

  1. Interventionist. Regulators should use the law proactively to break up companies that are abusing their market power and restore a competitive market. The size of a company is a good guide as to when this should be done.
  2. Consumer welfare. Abuse of market power is rare and dominant market positions can be achieved through delivering improvements in consumer welfare. Therefore, antitrust laws should be used not to break up companies that have grown big through successful competition, but to address instances of collusion, price fixing, or other anti-competitive behavior.
  3. Free market. Antitrust law is unnecessary. Market processes routinely undermine monopolies—and attempts to create monopolies. Laws against “unfair competition” prevent property owners from experimenting with joint ventures and other innovations that can improve consumer welfare.

Until recently, there was a sharp partisan divide between these schools, which can be roughly described as liberal, conservative, and libertarian, respectively. Traditionally in practice, this meant that antitrust conservatives would more often side with the libertarian camp, while leaving some room for cooperation with the liberal faction. However, the recent rise of “big tech” has led some conservatives to turn to the most interventionist approach with a zeal that threatens innovation in America’s world-leading technology industry.

The interventionist approach suffers from the same problems classical liberal economists have long identified with government interventions in markets.

First, there is the “knowledge problem”—how do regulators know better than the market what the best market structure is?

Then there are what are known as public choice considerations—regulators might exercise their powers to promote their own preferred policy positions. The very existence of those powers will lead to intense lobbying by regulated entities—both those seeking regulatory relief and those who benefit from entry barriers that limit competition from potential new entrants in a market.

The consumer welfare approach also has problems. Retaining antitrust law as an option that may be used against entrepreneurs carries the same threat to innovation posed by the interventionist approach. For instance, politicians with an animus against certain companies may pressure regulators into opposing mergers involving those companies. Regulators assessing unfair competition will not be immune from the knowledge problem and public choice effects. Entrepreneurs, eager to avoid provoking antitrust enforcement actions, will be dissuaded from pursuing innovations that might run afoul of the law.

The third approach, abolishing antitrust law, is extremely controversial. There is a widespread belief, among policy makers, the media, and the public, that without the threat of antitrust law, companies will disregard customer preferences, extract excessive profits, and kill off competitors. Yet there is no such thing as a dominant market position unless it is guaranteed by government. AOL, Borders, Blockbuster, Sears, Kodak, and many other firms once considered dominant in their markets have fallen as the result of competition, without any antitrust action.

This process of creative destruction, succinctly described by the economist Joseph Schumpeter, is a major driver of the kind of innovation that helps raise living standards. It will surely continue unless, ironically, antitrust regulators gain too much power. Were that to happen, large firms will be tempted to reach accommodations with a government that restricts their activities in exchange for not being broken up. Those accommodations will usually include protections and guarantees that act as entry barriers against potential innovative challengers. The result will be less competition, fewer innovations, and lower consumer welfare.

Creative destruction is the best answer to dominant market positions. Rather than use antitrust law aggressively, those who wish to see big companies fall quickly should instead work to end antitrust law. As for other barriers to creative destruction—for instance, financial regulations that make launching an initial public offering of stock prohibitively costly—increased competition can be achieved through deregulation in those other areas.


Presented by Romano Pisciotti

Antitrust law and antitrust compliance

Rechtsanwalt Dr. Rübenstahl has worked as a defense lawyer and in an advisory capacity in the areas of white collar crimes, criminal law and criminal tax law for over fifteen years. He began his career at a law firm which specialized in appeals of criminal cases at the Federal Court of Justice’s seat in Karlsruhe. He has also worked in large international law firms in Frankfurt, with an increasing focus on the areas of compliance and internal investigations. Between 2015 and 2017, he was a successful attorney and founding partner of a renowned boutique criminal-law firm specializing nationwide in medical, white collar, and criminal tax-law with offices in Cologne, Frankfurt am Main, and Berlin before founding the law office of Rübenstahl and Associates in 2018.

Rechtsanwalt Dr. Markus Rübenstahl, Mag. iur., is Co-Editor of the first edition of the book “Kartell Compliance | Prävention – Investigation – Corporate Defense – Remediation” and author of the chapter „Strafbare Submissionsabsprachen und (Submissions-)Betrug“. The handbook covers the topic of civil and criminal offences, antitrust law and antitrust compliance comprehensively. In the book you will also find chapters on antitrust compliance requirements in CH, A, F, I, E, USA, China, Russia and Brazil.


Presented by Romano Pisciotti