Test SLC (merger)


Institution Definition

Most competition authorities rely on one of two main tests applied to assess whether a merger has anti-competitive effects: (i) the dominance test and (ii) the significant lessening of competition (SLC) test. Some, such as the EU, have a hybrid test, which combines the dominance and the SLC standards. Under the dominance test a merger is anticompetitive and can be prohibited if it strengthens or creates a dominant position in the market. The notion of dominance is not clearly defined in economics but it certainly reaches situations in which a market leader with a degree of independence from competitive pressures is created. Dominance can be interpreted either narrowly whereby it covers only situations where the merged firm becomes dominant or more broadly as covering also collective dominance, i.e. situations where the merger affects the competitive structure of the market in a manner that is conducive to creating a coordinated equilibrium among competitors. Under the significant lessening of competition test, a merger has anti-competitive effects if it is likely to substantially lessen competition in the market. In comparison with the dominance test, the SLC test focuses on the effects of the merger on the market and on the loss of competition among firms rather than on threshold structural issues such as market shares. Under the SLC test, the investigation and assessment of a merger are more concerned with whether prices are likely to rise after the merger is consummated. (...) © OCDE

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