Printed in the Business Monday of May 28th,2012
The Commission has noted with interest the recent upsurge in merger activity in the commercial banking sector in Barbados. It is clear from this recent activity, that there is a move to consolidate operations in this area in order to respond to the competitive pressures which exist in the market.
The Commission will always approve of activity that stimulates
competition, and mergers represent perhaps the most effective means of
increasing market share whether through assimilating the share of a
rival, or creating the scale of output that will allow firms to better
compete for market share.
Most of the recent mergers have fallen below the threshold level of 40%
market share, the level at which the merging firms are required to seek
the approval of the Commission to merge. Nevertheless, it is important
that amidst this resurgence in activity that firms are aware of their
obligations and responsibilities with regard to merger transactions
under the competition legislation in Barbados.
It is important first of all to understand the type of transactions that
constitute a merger. The law describes a merger as:
“The cessation of two or more enterprises from being distinct, whether
by amalgamation, by one or more of the enterprises acquiring control
over another or otherwise.”
Section 6 of the Act also states that the Commission has the power to
prohibit the acquisition of one company by another company, and the
acquisition of the assets of one company by another company.
The range of transactions therefore falling under the jurisdiction of
the Commission includes several different types of combinations and
arrangements. The most obvious example is where a company proposes to
buy a majority shareholding or a significant minority shareholding in
another company. However, a merger subject to the Act may also include
the purchase of assets such as businesses, plant and equipment,
intellectual property or the formation of a joint venture.
The key merger prohibition is found in Section 20(1) of the Fair
Competition Act (Act), which states:
“From the commencement of this Act, all mergers by an enterprise that
(a) by itself controls, or
(b) together with any other enterprise with which it intends to effect
the merger is likely to control not less than 40 per cent of any market
or other such amount of the market as the Minister may by Order
prescribe are prohibited unless permitted by the Commission in
accordance with this section.”
Section 20(2) also states that if an enterprise wishes to effect a
merger, an application must be made to the Commission for permission to
Based on these provisions Barbados can be said to have a mandatory
notification system, which requires parties to contact the Commission
once the transaction meets the threshold level established.
Parties are strongly encouraged to approach the Commission on a formal
or informal basis, as soon as a proposed acquisition that may be subject
to the Act is certain to proceed, and to do so well before the
completion of any merger.
Merging parties that believe a proposed merger will breach the 40%
market share threshold should as early as possible provide the
Commission with the requisite information using the Merger Application
Form (Schedule of Statutory Instrument 2009 No. 104). This form requires
information such as the background of the companies, the reasons for
the transaction, the efficiencies to be generated as well as supporting
financial information. This information will help the Commission to make
a final decision on the matter in a timely manner.
Once the transaction is placed before the Commission, an investigation
into the proposed merger is conducted. The Commission examines the
transaction giving consideration to whether the merger is likely to:
- create a firm with market power or market dominance, or is likely to
enhance the existing power or dominance of a firm;
- reduce the availability of closely substitutable goods or services
after the merger is completed; or
- cause substantial harm to competition, consumers and the economy of
If a proposed merger does raise substantial competition concerns the
Commission may still permit the merger to proceed if it can be
demonstrated that the merger is likely to bring about significant
efficiency gains that can more than offset the competition concerns.
If a proposed merger is not permissible in its existing form, in some
instances the Commission will indicate to the parties how its concerns
might be remedied by modifying the proposal so that the merger does not
contravene the Act.
If the merger parties also consider that the transaction could be
modified to reduce or eliminate the Commission’s concerns, they may
choose to offer the Commission binding undertakings aimed at
restructuring the proposal to address the problem areas identified. If
this occurs the Commission will permit the merger. These actions are
designed to reduce the anti-competitive detriment associated with the
However, if upon the conclusion of its investigation and the exhaustion
of possible remedies, the Commission determines that a proposed merger
is likely to contravene the Act it will serve a copy of its findings on
the applicant indicating that completion of the merger is prohibited.
Generally the prohibition of a merger is a last resort and is rare among
competition authorities. For example, the European Commission last year
reported that it had prohibited 21 mergers out of approximately 4,500
transactions reviewed since the European Union Merger Regulation came
into force in September 1990. Similarly, the Fair Trading Commission
recognises the importance and value of mergers to economic activity and
only in circumstances where the detriment to competition is
overwhelming, is the transaction likely to be prohibited.