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The ‘failing firm’ defence in EU and UK merger control
Published by a LexisNexis Competition expert
Practice notesThe ‘failing firm’ defence in EU and UK merger control
Published by a LexisNexis Competition expert
Practice notesAn assessment of the competitive effects of a merger involves examining the degree to which the merging firms are close and effective competitors of each other. This judgment must be forward-looking, considering how competition might change in future years. Relevant factors include: possible obsolescence of products; the state and development of any key technology; the resources of the firms; the firms’ level of debts; and whether the activities that are the subject of the merger are core or peripheral.
At its most acute, it may be that one of the merging firms is simply unlikely to be able to continue in business in the future due to, for example, its financial losses and level of debt or its core products or technology having become obsolete. In such a case the acquiring company will argue that its target is or, over the appropriate future horizon, will not be an effective competitor or will exit the market altogether. This argument has come to be known as the ‘failing firm’ (or ‘existing firm’) defence (and the
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