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Case study Schneider-LeGrand Merger

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  1. Why did the European Commission block the French merger?
  2. 2.What links exist between competition and concentration according to Mario Monti and the economic theories?
  3. Is it usual to meet this kind of refusal in Europe?
    1. Numbers and examples
    2. General theories and aims of the EU competition policy
  4. What are the arguments against Mario Monti's position on mergers and acquisitions?
    1. Mario Monti's position
    2. Arguments against Mario Monti's position
    3. Impact of the case on the Mario Monti's approach and on the merger regulation

Beginning with a certain turnover, the EU merger rules are to be applied to cross-border concentrations, irrespective of the size of the company or area of their activity. A pre-merger notification to the European Commission is obligatory. Most cases are closed by the completion of the phase I, which lasts approximately six weeks. Only a small percentage (5%) passes into phase II, which means another four months time of investigation. The final decision is then subject to juridical review by the Court of First Instance (CFI) and European Court of Justice. At the beginning of the new millennium high-profile cases have called attention to the differences in approach between the competition authorities. On 16 February 2001, the Commission received a notification of a merger plan of Schneider Electrics which wanted to acquire Legrand by way of an exchange of shares announced on 15 January 2001. The offer involves a concentration of all the shares of Legrand, and according to the Merger Regulation that demonstrates an acquisition of control.

[...] Moreover some critics also state that ?inadequate checks on the Commission's fiercely independent task force have fostered an arrogant, trigger- happy culture that has encouraged over-zealous officials to forge ahead without due regard for the facts and proper procedures.?[7] 6 Impact of the case on the Mario Monti's approach and on the merger regulation The developments during Mario Monti's legacy provoked criticism, especially with regard to more bureaucratic approach caused by increased number of notifications and detail of investigation. During these years, the EC took a series of controversial decisions (including eight prohibition decisions) and suffered a series of defeats at the courts (CFI's judgements in Airtours, Schneider and Tetra Laval). [...]

[...] A central part of this competition, since 1990, is merger control, presided over by the then commissioner Mario Monti and his Merger Task Force (MTF). One could say that governments have a dichotomous relationship with competition; on the one hand they wish to stimulate the growth of businesses both in numbers and in size. However, on the other hand, those same firms must not be allowed to become large?, says the same government. In other words, a firm must not attain such a size or position, with which it would obtain a dominant position in its market. [...]

[...] - The companies also have a strong impression, that the EC's view is modified according to the merger candidates' competitors, who can easily approach the investigators, which is not the case of the candidate companies. When the competitors try to obviate the merger, it can be a sign that the merger could increase competition. In other words, there is a risk that while listening to the competitors, the EC would prevent a merger favorable to competition. - The EC's decisions are often based on speculative and artificial theories and are disconnected from the industrial context and thus less predictable. [...]

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