Laws governing market dominance and competition are important facets of market regulation.
This area of business law is governed, not for the benefit of shareholders or any other investor for that matter, but to uphold the rights and best interests of the public.
Shareholders require protection when two companies merger to ensure their best financial interests, but if this is not settled at boardroom level – the time is right for activist shareholder groups step in.
But mergers and acquisitions require close attention to ensure that consumers of goods and services produced by these companies are not unfairly treated.
The rights and best interests of consumers are not necessarily served by the marriage of two rival companies.
Competition authorities are not regulators in the sense that Ofcom or Ofwat are – all industry regulators have the remit to enforce competition law in their sectors. The main competition authorities are arms of government through which appropriate competition laws are enforced.
If these authorities believe that the merger of two companies in a particular industry would lessen competition and that post-merger consumers would face higher prices and lower quality products, then that merger will not be permitted 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.