Collective Dominance under EC Merger Regulation No 139/2004

Abstract: The previous substantive test in Article 2(3) of the Merger Regulation 4064/89 had as its cornerstone the concept of dominance. The test that is also referred as dominance test, declared incompatible with the common market concentrations that would create or strengthen a dominant position as a result of which competition would be significantly impeded. The wording of the Article referred initially to a position of single dominance. It soon became evident that mergers that would not fill the dominance threshold but would have negative effects on competition would escape merger control if Article 2(3) were to be interpreted literally according to its wording. The concern was raised in relation to oligopolistic markets where the amount of competitors is low and competitive environment makes it easy for the undertakings to monitor each other's competitive strategies and to engage in non-cooperative strategic interaction without engaging in an agreement or other form of collusive conduct that is prohibited in the Community law under Article 81 EC. This led to the development of the concept of collective dominance in the case law of the Community Courts and decision-making practice of the Commission. The case law shows that there has been evident difficulties in defining the scope of the doctrine and to establish a criteria based on which it would be possible to intervene on anti-competitive concentrations on oligopolistic markets while at the same time provide the business with some level of legal certainty. The need to re-evaluate the substantive test was raised particularly in relation to the concept of collective dominance. 1st of May 2004 came into force reviewed Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings. The reform led to the rewording of the test of compatibility with the common market in Article 2(3). The second limb of old Article 2(3) was turned into the principle test while the old dominance criterion was maintained as a key indicator of such an effect on competition. It meant a change from the traditionally used dominance test to Significant Impediment to Effective Competition test (SIEC test). Open issue is whether the rewording will lessen the significance of the concept of collective dominance or whether it will retain its role in the EC merger control. Therefore, the question arises into which direction the merger control on oligopolistic markets will move from now on. In the context of the merger reform the Commission published Guidelines on the assessment of horizontal concentrations. They are to enhance legal certainty and provide guidance on the criteria the Commission is using in its merger practice. The Horizontal Guidelines and the new EC Merger Regulation now clarify that competition may be impeded through the traditional concept of dominance and non-coordinated and coordinated effects. Comparison between the Airtours case and Horizontal Guidelines demonstrates that the latter corresponds closely to the doctrine of collective dominance as established in the case law. However, neither the EC Merger Regulation 139/2004 nor the Horizontal Guidelines give any detailed guidance as to the future of the concept of collective dominance in practice. They both demonstrate a slight change from the concept of dominance as the central criteria in the appraisal of concentrations. The main purpose of this master thesis is to evaluate the possible outcomes of the merger reform. It is to take part on the debates around the concept of collective dominance and its future role in EC merger control. Answer to this paradigm is to be received from the future merger practice of the Commission and interpretation of the Community Courts.