Extraterritorial Merger Control Enforcement in Small Economies? Challenges and Possibilities

• Author: Katri Paas-Mohando
• Pages: 137-146

137

JURIDICA INTERNATIONAL 21/2014

Katri Paas-Mohando*1

PhD, Adjunct Lecturer, University of Tartu

Senior Associate at LAWIN Tallinn

Extraterritorial Merger

Control Enforcement in Small

Economies—Challenges

and Possibilities

1. Introduction

It has been widely acknowledged that, while mergers of undertakings can expand markets and bring ben-

ef‌i ts to the economy, some mergers may reduce competition to an undesirable extent. Therefore, many

states, around the globe, have enacted merger control regimes to prevent the emergence of anti-competitive

market structures. It is typical that merger control rules require that merging parties notify a competi-

tion authority of their transactions before their implementation, whereupon the authority may prohibit the

merger or impose conditions on the merging parties if the merger causes competition concerns.

In principle, any state may require the notif‌i cation of whichever mergers it wishes (whether domestic

or involving foreign undertakings) or prohibit the same. States may also take enforcement actions within

their boundaries, but their orders with respect to foreign undertakings generally remain ‘toothless’ abroad,

where no mechanism for enforcement can be applied. Hence, exercising effective control over extra-

territorial mergers poses challenges to all states.

From the perspective of national competition authorities, four types of merger situations can be dis-

tinguished: i) domestic mergers, wherein all f‌i rms concerned have their seat within the state of the author-

ity; ii) foreign mergers, wherein the f‌i rms concerned have their seat in one and the same foreign state; iii)

international mergers, wherein one of the f‌i rms concerned is foreign and the other has its seat in the state

of the authority; and iv) foreign international mergers, wherein the companies concerned have their seat in

two (or more) foreign states.*2

S mall economies are confronted with foreign, international, and foreign international mergers more

often than are larger economies.*3 At the same time, their power of enforcement, to give effect either to their

1 The article is based on the author’s doctoral thesis Implications of Smallness of an Economy on Merger Control, available

at http://dspace.utlib.ee/dspace/bitstream/handle/10062/10282/Paaskatri.pdf?sequence=1 (most recently accessed on

23.5.2014). The author thanks Michal S. Gal, Rosa Greaves, and Michael Steinicke for their useful comments and Paul Varul

and Olav Kolstad for excellent supervision. All errors and omissions remain my own.

2 Walter A. Stoffel. International mergers: Merger in small economies. – Annual Proceedings of the Fordham Competition

Law Institute: International Antitrust Law & Policy, Fordham Competition Law Institute, Juris Publishing, Inc. 2007,

p. 323.

3 Ibid., p. 323.

http://dx.doi.org/10.12697/JI.2014.21.12