The failing firm defence during and post-COVID-19: policy and the evidence required

Abstract

Governments in developed countries have responded to the COVID-19 pandemic with an almost unprecedented level of government support, thereby preserving many firms and jobs. However, this government support will be progressively withdrawn, and coupled with recent, and expected further, increases in interest rates and the market impacts associated with changes in consumers’ and firms’ behaviour, there is likely to be restructuring in many sectors. This raises the public policy question as to the appropriate balance between government support facilitating and ameliorating this restructuring and the role played by merger control, including how the COVID-19 pandemic and its aftermath affects the application of the so-called ‘failing’ or ‘exiting’ firm defence or scenario under UK and EU merger control. To consider these questions, this article: addresses the policy considerations underpinning the failing firm defence under UK and EU merger control;describes the extensive government support and State aid provided in the UK in response to COVID-19 and the impact of COVID-19 on various sectors;and provides an overview of the evidence required for the ‘failing firm defence’, given these policy and factual considerations. © 2022 Edward Elgar Publishing Ltd.