The Undulating Path of Merger Policy

Abstract

Merger control has been marked by two major changes to both procedural and substantive law; the mandatory pre-merger notification regime was becoming increasingly burdensome for both businesses and the Commission. In 1990, the pre-merger notification system was abruptly abolished in favour of a voluntary notification system. The so-called “strike down” system already existed in Australia, but the change was probably due less to harmonization and more to some effective lobbying by big business. Regarding the substantive test, the “dominance” standard proved to be highly permissive. Few mergers were halted and the presence of very large market shares post-merger could still be overcome by an unduly generous view of the likelihood of new entry disciplining the merged firm. An idealized version of potential competition (contestability theory) held sway. In 2001, the test in s 47 was changed to the SLC threshold in an effort to toughen up the law. Horizontal mergers, increasing the likelihood of collusion (due to increased market concentration), could now be caught. Yet it is doubtful that the sterner test actually resulted in more mergers being prohibited. This chapter briefly explores the experience of vertical and conglomerate mergers as well as a new section (s 47A) that addresses overseas mergers that have effects upon New Zealand markets.