Research On Efficiency Defense Issues Of Vertical M&A Antitrust Review

In the modern business economy, mergers and acquisitions, which can rapidly expand the business scale, integrate market resources, promote the competitiveness of the enterprises, have been especially favored by large companies, however on the other hand, M&A may also increase the acquirer’s market forces, resulting in the risk of collusion in the relevant market with the acquired party or other business operators, which in turn undermine the fair and effective competition of the market. And in the field of antitrust economics theory, business concentration is also one of the main contents, of which about the horizontal M&A impact of the anti-monopoly on competition and welfare, has a broad and in-depth discussion in industrial organization theory, of which has bee-n basically achieved consensus on some major problems, and have relatively extensive and sophisticated theoretical results. But the antitrust economic analysis on the vertical M&A was more complicated, because on the one hand, vertical M&A can bring cost savings, elimination of double markups, the effective integration of idle resources in industrial chain, the improvement of the economic efficiency; on the other hand, vertical M&A may extend the monopoly power in industrial chain, resulting in blockade to exclude competitors from the market and the price discrimination. Therefore, with regard to these antitrust analysis and comparison of the positive and negative effects of vertical M&A, either in economic circles or in the judicial practice of antitrust, currently there are large differences and disputes, rather than horizontal mergers, vertical M&A associated theory and research results are also less, so the antitrust analysis of vertical M&A requires more attention.The efficiency defense system has become an important system in business concentration antitrust’s review and evaluation process in Europe and the United States. Its main content is that, when a merger is determined to have or may have anti-competitive effects by the anti-monopoly law enforcement agencies, if the acquirer party can prove that centralization’s arising efficiency can offset or exceed its anti-competitive effects, then the M&A can be approved at last. The background of this system originated from the changes of antitrust review standards from the single "Structuralism" to "Behaviorism", and from the "Per Se Rule" to "Reasonable Presumption", but more importantly it is due to the highly competitiveness in the modern globalization of the market economy condition, the anti-monopoly enforcement authority gradually realize the importance of the market economy efficiency which M&A brought, so whether take economic efficiency as a measure standard of allowance of a business combination,or write it into the competition policy objectives as one of the main contents of the antitrust exemption. Therefore, reasonably setting a efficiency defense system has a very important role for law enforcement agencies to accurately measure the efficiency enhancement and anti-competitive effects of M&A, so as to make rational decisions that the M&A should be allowed or not. As for different types of M&A, which bring different efficiency type, efficiency size, efficiency identifiable and accessibleness degree and so on, but as mentioned before, the consensus is that:In general, horizontal M&A brings the less efficiency effects than the non-horizontal M&A, but leads to the greater anti-competitive effects than the non-horizontal M&A. It is because of the special and complex effects of vertical M&A on competition, resulting in more problems about application of efficiency defense system of vertical M&A than horizontal M&A, s-o antitrust authorities should be more cautious, comprehensive in reviewing the vertical M&A, and make long-term analysis, evaluation and trade-offs.Based on the above two points, this paper is to select the vertical M&A this specific business concentration act as the research object, take the trade-offs of the efficiency effects and anti-competitive effects of vertical M&A, and their related antitrust policy as research contents, and then do a useful preliminary study about the applicability of efficiency defense system of vertical M&A. The main part of the thesis is divided into four parts, the first part introduces the connotation of efficiency defense and its theoretical source--Williamson trade-off theory, and further combs the evolution process of the American efficiency defense system of the concentration, and reviews Western scholars’views about the efficiency factor of the concentration. The second part does a detailed theoretical analysis the efficiency effects and anti-competitive effects of the vertical M&A, and and points out that in any case of a merger these two effects should be weighed in the antitrust review, and the efficiency defense syst-em is specifically established to guarantee that it can improve antitrust review system of business concentration. The third part takes a case-General Motors Company acquired Delphi Corporation, which is the first and sheer vertical merger that the Ministry of Commerce passed with some conditions attached, as an example, to conduct a detailed analysis of trade-offs of the effects. By the previous theoretical study and case analysis, the last part of the paper points out that as for any merger case, the pros and cons of effects should be weighed, especially for vertical M&A, whose unique efficiency effects are more needy to be considered, and are more suitable for "behaviorism" standard of antitrust review, and more importantly, the future innovation factor, dynamic efficiency factor should be taken into consideration. Also the paper indicates that, the enterprise especially the acquirer should fully and rationally use the efficiency defense system to convince the antitrust law enforcement agencies to pass through the M&A during the review process.