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Contribution to Book
Merger Policy for Small and Micro Jurisdictions
More Pros and Cons of Merger Control (2012)
  • Michal Gal, University of Haifa

Merger policy is an important tool for limiting privately-erected artificial barriers to competition. Its unique qualities, mainly the fact that it is applied ex ante in order to prevent external changes in market structure which harm social welfare, and the fact that it is the most effective tool in a competition law's toolbox for limiting oligopolistic coordination, serve to explain its spread around the world. Countries of all sizes and economic characteristics have adopted it into their competition laws, from India to Guernsey, from China to Barbados. Indeed, the number of countries with merger regulation has increased from 8 in 1989 to more than 110 in 2009, and the number is still growing. This wide-spread adoption raises the question of whether there is a one-size-fits-all merger policy, or whether some jurisdictions' economic characteristics affect their ability to effectively apply a merger policy in a way which requires some fine-tuning. This question, which generates interesting scholarly and practical debates, is addressed in this paper, focusing on small and on micro jurisdictions. The latter, in particular, bring some of the tradeoffs involved in the design of merger policy to an extreme and provide an interesting and under-explored case study. Two forces push and pull merger policy. On the one hand, the "follower push" whereby jurisdictions- mostly small, developing or young- benefit from transplanting and following the laws of large, developed jurisdictions with efficient and effective merger regimes. The follower push is often comprised of both internal and external forces. On the other hand, the "unique characteristics pull" whereby the characteristics of a jurisdiction affect its ability to effectively enforce a transplanted law and pull towards adopting a merger policy that best fits its characteristics. Designing a merger law mandates each jurisdiction to find its optimal balance between these two forces and may vary from one jurisdiction to another, depending, inter alia, on the jurisdiction's trade ties and the effectiveness of its enforcement system. Yet these forces do not necessarily lead in different directions; Rather, many parts of a merger regime may fit both the follower and the followed jurisdictions (e.g., adopting a Significant Lessening of Competition test as a benchmark for merger illegality). The challenge is to identify those instances in which the unique characteristics pull leads in a different direction and is stronger than the follower push and to design rules accordingly. Chapter I briefly explores the two forces noted above. The following chapters focus on the "unique characteristics pull." Chapter II introduces the methodology. Chapter III then explores the effects of the unique characteristics of small size on merger policy. This paper attempts to carry the analysis one step further than that previously performed by the author by proposing a methodological framework to assist in the analysis and by focusing on aspects not previously explored. Chapter IV performs such an analysis for micro economies, a subject which so far has been largely neglected in the literature. Of course, dealing with all aspects of merger policy in such jurisdictions is beyond the scope of a short paper, but some relevant observations and suggestions are offered, based on theoretical observations as well as real-world examples.

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Michal Gal. "Merger Policy for Small and Micro Jurisdictions" More Pros and Cons of Merger Control (2012)
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