According to the European Commission – who has authority over competition law (Regulation 139/2004 and Art. 83 TEC) – competition law requires that firms proposing to merge must first gain authorization from the relevant government authority. Although firms are allowed to go forward with the merger without authorization, they face the prospect of demerger should the merger later be found to ‘lessen competition’.
When deciding whether or not to take this chance, a firm should base their decision on the test the EU would employ: “whether or not a concentration would, if it went ahead, significantly impede effective competition… in particular as a result of the creation or strengthening off a dominant position.”
Further, according to EC law, a concentration exists when a “change of control on a lasting basis results from (a) the merger of two or more previously independent undertakings, (b) the acquisition…if direct or indirect control of the whole or parts of one or more other undertakings.”
However, due to the multiple languages used within the European Union, more often than not understanding the exact parameters and consequences of a proposed merger or acquisition remain murky.
For this reason, a foreign language translation of all documents and laws must be carefully undertaken before a decision to go forward with a deal.