The Fair Trading Commission’s
Merger Investigation Procedures
The Fair Competition Act (the Act), at Section 20 states, that
mergers which are likely to result in the control of in excess of forty (40)
percent of any market in Barbados are prohibited unless permitted by the
Commission. This provision requires the Commission to investigate all mergers
that meet this threshold with a view to granting or denying permission to the parties.
The investigation focuses on the extent to which the proposed transaction impacts
competition positively or negatively in the domestic market.
This merger law should not be interpreted as an intention to
prevent or restrict in any way, the merging process or business
expansion in Barbados.
The Commission is aware that in the combining of resources through a merger,
firms are able to increase their efficiency through reduced costs, strategic
reorganization, new technologies and combined expertise. In addition mergers
and acquisitions are easily one of the quickest, cheapest and often times the
only means whereby firms can increase their efficiency or source the capital
needed to compete with larger and more efficient firms.
In this modern era of industrial organization mergers
can be viewed as almost essential for sustained economic expansion. The
Commission therefore recognizes the importance of its mandate and the need to undertake
its responsibility in a very considered manner.
Having received an application for the effecting of
a merger the Commission will first review the proposal in accordance with the forty
(40) percent market share threshold established, to determine if the
transaction requires an investigation. This analysis will involve:
- A determination of the specific market(s) for consideration, this is done through
a review of the various products and services supplied by the enterprises, and
the geographic area over which their products are distributed.
- A determination of the relevant percentage market share(s) of the enterprise(s) pre
and post merger in each market affected. This is done through a calculation of
the volume of output supplied by the enterprises relative to the total market.
If based on the preliminary analysis the merged
enterprises do not control in excess of the threshold market share as
determined by the Act, the applicant will be notified by letter, that the
proposed merger falls outside the jurisdiction of the Commission and therefore
does not require the permission of the Commission.
If the preliminary analysis indicates that the
combined enterprise will control an amount equal to or greater than the 40
percent threshold market share, the applicant will be formally notified of the
intention of the Commission to investigate the proposed arrangement to
determine the extent to which it affects competition in the domestic economy.
Commission shall allow itself a maximum period of ninety (90) business days, to
conduct an investigation into the arrangement. In conducting its investigation the
Commission will give consideration to:
structure of the markets likely to be affected by the proposed merger including
the number and size of competitors in the various product markets before and
after the merger and the barriers to entry that will impact on these market
- The degree of control exercised by the enterprises, particularly the economic and
financial power of the enterprises; and the extent to which the merged
enterprises will have the market power to raise prices unilaterally or will
have incentives to enter into collusive arrangements with the other market participants.
- The availability of alternatives to the services or goods provided by the
enterprises concerned in the merger; i.e. the degree to which following the
merger there will be an adequate supply of alternatives to the goods and
services provided by the merging parties.
- The likely effect of the proposed merger on consumers and the economy; or the
degree to which there will be improvements in the quality and delivery of the
goods and services supplied in the market, and the extent to which any
reduction in costs are passed directly to the consumer in reduced prices or
indirectly through strategic investments.
- The actual or potential competition from other enterprises and the likelihood of
detriment to competition i.e. the impact of the merger on the productivity and
viability of the existing market participants and potential new entrants.
There are a series of outcomes possible once the Commission has completed its
investigation and adjudication of the merger.
having assessed the transaction the Commission finds that the merger will not affect
competition adversely or be detrimental to consumers, the Commission shall
grant its permission for the merger to proceed.
the other hand should the Commission determine that the merger will restrict
competition but the merger parties can convincingly demonstrate that the
transaction will produce significant cost efficiencies which will be shared
with consumers in the form of lower prices, improved quality of products, etc.
the merger is again likely to be permitted.
however the merger is likely to materially restrict competition or be
detrimental to consumers without sufficient redeeming efficiency benefits as
outlined above, the Commission may direct the enterprises within an agreed
period to divest specific interests or part of the combined operation. This
would be the case where the Commission is satisfied that such divestment would make
the merger less likely to lessen competition or to adversely affect the
interests of consumers or the economy.
no prudent divestment arrangement can be reached given the significant harm to
competition, then the merger is likely to be prohibited.
If you have any query about the Commission’s role in
regulating Mergers in Barbados,
please consult the Commission’s Merger Guidelines at this site.