Merger Enforcement Guidelines

Draft for Consultation
March 2004

Part 11 - Conglomerate Mergers

11.1 In general, conglomerate mergers¹²⁶ only give rise to concerns under the Act when it can be demonstrated that, in the absence of the merger, one of the merging parties is likely to have entered the market de novo. In such circumstances, consideration is given to whether prices are likely to be materially higher in a substantial part of the market for two years than they would be if the merger did not proceed. Concerns may be raised when a dominant firm that is exercising market power in the relevant market acquires a firm in an adjacent market that has signalled an intention to enter the relevant market by attempting to negotiate very favourable contracts with buyers of the dominant firm. Conversely, a similar anticompetitive effect can result when a large firm that may otherwise have entered the relevant market de novo (which would have increased capacity and introduced a new and independent source of competition) simply replaces a significant incumbent through merger.

11.2 Before concluding that de novo entry is likely to have occurred in absence of the merger, the Bureau generally requires objectively verifiable information that clearly supports this proposition. Such information includes internal documents that pre-date the merger, recent initiatives by the firm to contest the market, an application for regulatory approval, or the registration of a patent.

¹²⁶ A conglomerate merger is a merger between parties that do not compete in the same relevant market or in relevant markets that are vertically related.