This document will answer the following questions: Why did the European Commission decide to block the French merger? What was the opinion of Henri Lachmann (the CEO of Schneider Electric) about the veto? Is it usual to meet with this kind of refusal in Europe? What are the arguments against Mario Monti's position on merge and acquisition? And how to restore the Merger Task Force's credibility after the judgment of the European Court of First Instance?
When production costs fall SC comes down to Mcm=Acm and this increases the producer's welfare. We can observe that output fell (Qm) and prices rose (Pm) but less as in the previous case. Thus, in order to conclude whether the merger had a good or bad impact on the market, one must compare whether the gain following a decrease in costs (PCKEG) is greater than the loss due to the dominant position (RCK).
What was the situation in the merger between Schneider and Legrand? Was it possible to reduce costs and find economies of scale? According to Schneider's Chairman the merger would have allowed the newly created company to drop costs and this, together with the increase in revenues, would have impacted the operating income by 210M€ by 2003.
[...] Schneider-Legrand merger: was Bruxelles “Wrong or Right”to block the merger? Question number Why did the European Commission decide to block the French merger? The European Commission blocked the French merger because it considered that this would result into a dominant position of the merged group in some European Countries, notably France. The European Commission divided the markets for electrical equipment against national lines. The European Commission divided the market in several sectors and showed that for two main sectors: electrical switchboards and wiring accessories the combined market share would have been between 40% to 90% which was a proof of a dominant position dominant position can be considered when the market share is higher than 50%). [...]
[...] From the social point of view: The Luxembourg-based Court in last year's decision to block the deal, the Commission made mistakes in both its analysis and procedures. A. The Court of First Instance's conclusion that the European Commission's economic analysis was “vitiated by errors and omissions” and not based on “cogent evidence”. Actually, the Commission made a serious error in its analysis when it divided the electrical equipment market into national markets but calculated the effect of the merger across borders in terms of dominant market share? [...]
[...] It seems there exists a moral problem in the Commission. Some Europeans admire him for standing up to the Americans by blocking Jack Welch's audacious bid to merge Honeywell into General Electric. Others worry about his methods and decisions, which are increasingly being challenged in court. They restore the Merger Task Force's credibility by doing following things: Mario Monti wants to appoint a chief economist recruited from academia, on the US model, to help officials keep within mainstream economic thinking. [...]
[...] Unlike the situation in the US, it can make a decision without having to refer the matter to a court. This results in an opaque process, which excludes the negotiation of valid remedies before a very advanced stage in the enquiry. The companies discover sometimes at the end of this long and demanding procedure what the Commission considers the stakes to be. The companies involved are informed of the founding of the analysis only very late on. Question Number Is it usual to meet with this kind of refusal in Europe? [...]
[...] Did Schneider Electric and Legrad's merger result into a dominant position? According to the Commission, yes but this was at a national market level, especially in France as showed previously and not at the European Market level where the newly created company would have had a similar size to other European competitors such as Siemens. Therefore, for the Commission creating national champions does not go in pair with effective competition. However this macro-economic analysis does not take into account the possible decrease in costs following a merger. [...]
APA Style reference
For your bibliographyOnline reading
with our online readerContent validated
by our reading committee
