Why should mergers and acquisitions need financial regulation? Surely the joining of two companies is the business of executives, M&A lawyers and shareholders. What is there to regulate?
Shareholders need protection to ensure they're not getting a raw deal, but this is usually achieved at boardroom level – if not, shareholder activist groups step in.
It is not the shareholders that competition authorities are concerned about, but the consumers of goods and services produced by these companies.
The rights and best interests of consumers are not necessarily served by the marriage of two rival companies.
If these authorities believe that the merger of two companies in a particular industry would lead to a reduction in competition – that post-merger consumers would face higher prices and lower quality products – then that merger cannot be allowed to go ahead without restrictions.
A monopoly exists if one company comes to dominate an industry sector. A cartel is similar but formed of several companies, although they have similar goals and so cartels are usually thought of as monopolistic.
Monopolies are rarely allowed to exist because they discourage competition.
Without competition consumers get a raw deal as monopolistic companies can sidestep the natural laws of free market supply and demand, setting their own prices, inhibiting innovation and product development and passing off inferior goods.
Healthy competition in industry helps deliver to consumers, better choice and fairer pricing.
Simon Bishop, a competition expert at RBB Economics, says: "The key issue is why do we have competition rules: it's primarily because we think competition is a good thing, it delivers low prices and the products that end-consumers want."
He adds: "If you get one firm that does not face effective competition from its rival in a particular area then it can put up its prices, it doesn't need to innovate as much so consumers pay higher prices for lower quality products."
Which are the main competition authorities?
US – The duty of regulating mergers and acquisitions and other considerations of market dominance in the US is shared by the Federal Trade Commission and the Department of Justice.
The FTC declares its mission to be the "prevention of anticompetitive, deceptive, and unfair business practices, enhancing informed consumer choice and public understanding of the competitive process, and accomplishing this without unduly burdening legitimate business activity".
Eurozone – The European Commission is the main executive body of the European Union and promotes its general interest.
Its competition division's main objective is to "enhance consumer welfare and efficiently functioning markets by protecting competition".
UK - The Competition and Markets Authority is the regulatory body that replaced the Competition Commission in 2014, which itself was the replacement body for the Monopolies and Mergers Commission which ran between 1973-1999.
The CMA works to "promote competition for the benefit of consumers and aims to make markets work well for consumers businesses and the economy".
Of increasing importance on the global competition stage is China, and its Anti-Monopoly Committee.
M&A law differences
Simon Bishop says that while there are big distinctions in the approaches of different authorities, their competition laws are all essentially trying to do the same thing: "Don't let firms get too big, and if they do get big, don't allow them to manipulate the market."
And while there are analogous activities shared by all the authorities, they are separated by differences in underlying philosophy, Bishop adds.
He explains how the US can appear to be more lenient:
"Loosely speaking, authorities in the US believe in the market more than European authorities," he says.
"In the US, if you come up with a great product idea and end up having a 60% share in the market – then good for you. But if you stop doing a good job, one of the firms that make up the other 40% will come in and take your business from you – that's a sign of a market that's working."
However, all authorities are not the same. Bishop says: "In Europe they would say '60% is a big number, we need to intervene'."
He cites the example of Google's $2.7bn fine imposed by the European Commission for abusing its position in online searches.
Google's dominance punished . . . in the EU
The EC concluded this year that Google had abused its dominance as a search engine by giving advantageous advertising for its own services.
When reported for the same alleged abuse in the US in 2011, the Federal Trade Commission ruled 18-months later – after Google agreed to tweak some of its business activities – that no further action was necessary.
The FTC reasoned that Google's search practices "could plausibly be justified as innovations that improved the company's product and the experience of its users".
Bishop says: "You can have the same merger ostensibly raising the same issues in all regions, but have different outcomes in each."
A global body exists to encourage harmonisation of competition rules.
Most countries are members of the International Competition Network and assemble regularly to discuss progress on harmonisation, but the reality is that the underlying philosophies of individual nations are difficult to resolve, says Bishop.
He says: "They can agree that there are holes in certain laws and that agencies around the world need to agree there are holes, but harmonisation over how different agencies approach the same issue is nearly impossible."