In accordance with the Law on the Protection of Competition (ZoZK) in our country, economic concentration refers to transactions or other actions in the business sector that directly affect the state of competition in this field.
If it is taken for granted that any transactions or activities of companies may have an impact on the market, it is all the more important to accurately determine the content and list of specific transactions that are subject to antitrust laws and are subject to control.
Agree on the terms
In European legal space, the theory of competition law uses a similar term, and in American (in particular, antitrust law) a concept is used that is close to the concept of economic concentration, but more focused on cases of "merging" of business and companies.
In its turn, the Russian term covers a wider range of enterprises: consolidation and merger transactions that affect competition and, therefore, fall under the control of the competition law.
Why is it so important to understand what criteria define the concept of economic concentration in the legislation of different countries?
Due to the fact that the influence of the degree of development of market factors in different countries is different and, despite the unification of economic laws, the development and role of EC is heterogeneous. Not always the concept has a negative value, therefore, the legal framework governing the association and interaction of market participants is different.
In the EEC countries
In European countries, traditionally, the merger and consolidation of business is regulated by the time frame in relation to interaction and control.
Economic concentration here means the strengthening or weakening of control over a long period or on a long-term basis, due to:
- The merger of a business as a result of the reorganization or takeover of several structures by one or several larger ones, the transfer of independent and economically independent organizations or their divisions to the jurisdiction of any one.
- The establishment of financial control, directly or indirectly, by one or more persons over another (other) business entity, or part of an organization. These are transactions that in content are the acquisition of assets or securities of companies with the transfer of managerial powers. The basis of the transaction can be contractual or any other and means the transfer of the possibility of influence on competition from one person to another.
An important factor is the long-term indicator, a long period of time in the slice of which control over economic concentration is carried out. However, transactions related to the acquisition of blocks of shares for resale, which are carried out by business financial or credit organizations, do not fall into the attention of the inspection bodies.
An exception is the transfer of authority of one legal entity to another in connection with the bankruptcy or liquidation procedure.
Over the ocean
Unlike the European market, in the United States state control over economic concentration is carried out “gently”, since in practice the legal concept of the term is not applied.
For example, in the Guide to horizontal merger, which is essentially a sub-legislative (supplementing the basic law) act, another term is used - "market concentration". The concept refers to the dependence of the market on the number of firms and their shares operating or present on the market for a certain period of time.
This regulation mainly concerns the actions of financial and credit organizations, their relative impact on the acquisition of majority securities and assets.
Control over competition is regulated by the Hart-Scott-Rodino Act and the Klein Act. Often, the legislation of the country interprets the term more broadly, meaning by “merger” two different interactions of business structures: both acquisition and merger.
In Russia
In Russian legislation, transactions of economic concentration are understood more specifically, purposefully and are interpreted from the point of view of the "generic concept".
The merger of organizations in the Russian legal field means the accession of one legal entity or business entity to another on the basis of transfer acts.
In the era of crises, the most acute question is what is considered economic concentration, how does it affect competition between different actors or market participants. ZOZK and antitrust regulations regulate the features of legal norms of control.
Suffice it to say that many transactions as types of economic concentration (mergers or business reorganizations) in our country are impossible without prior approval and obtaining permits from the antimonopoly authority.
The lists of conditions and features for monitoring certain categories of economic structures are established, first of all, these features relate to business in the financial sector.
Control over the economic concentration of financial institutions
There are a number of conditions for transactions involving financial institutions, which require the prior consent of the antimonopoly authority.
These signs are conventionally divided into two main groups:
- financial indicators characterizing the total volume of transactions of a financial organization;
- legal and economic content of transactions or merger and merger actions.
Moreover, the system for determining signs of economic concentration is regulated by regulatory acts of the Government of the Russian Federation: for each category of financial structures and organizations, their own conditions are established, depending on the characteristics of financial services markets.
Asset limit or threshold values
There is a concept of threshold values of the value of assets of financial organizations. The total value of assets determines the obligation for organizations to negotiate with the antimonopoly authority for various affiliations and mergers of one organization with another.
Obtaining permits is mandatory if, according to the latest balance sheets, the total value of assets exceeds the following values:
- Credit organizations - from 24 billion rubles.
- Companies involved in microfinance or leasing transactions - 3 billion rubles.
- Currency and stock exchanges - 1 billion rubles.
- Insurance companies. (excluding medical insurance) - 200 million rubles.
- Pawnshops and medical insurance companies comply with the threshold of 100 million rubles.
At the same time, the amount of the book value of assets is understood to be that which is relevant on the day the organization addresses the antimonopoly authority.
Transactions and Competition
Threshold values are also defined in relation to activities carried out by financial organizations with shares and assets.
For example, economic concentration and antitrust law interact in the implementation of various transactions between business entities in the Russian Federation in the following cases.
Actions:
- merging or joining one financial structure to another;
- association of commercial organizations;
- merger of commercial organizations or the merger of one or more financial organizations with another financial organization;
- the creation of such a commercial organization, in which the authorized capital is paid for by the shares or assets of a financial organization, this also includes the acquisition of rights to the assets of financial organizations, indicated in art. 29 Federal Law "On Protection of Competition";
- merging a financial organization with a commercial organization or joining a commercial organization with a financial one.
Transactions:
- associated with the acquisition of a share or shares of a financial organization, if they exceed the threshold values;
- on the acquisition of assets that go beyond the amount determined by regulatory acts of the Government of the Russian Federation (today, the amount should not exceed 10 percent of the total value of the assets of a financial organization);
- on the acquisition of rights to exercise the functions of the executive body of a financial organization, etc.
Opportunities for the development of regulation of economic concentration
Recently, in the financial sector of the country, the process of mergers and acquisitions has intensified, and therefore the content of concepts subject to the influence of antitrust regulation is changing.
The number of criteria filling the term “economic concentration” has increased, although the Law on the Protection of Competition remains unchanged.
These criteria can be defined as:
- a growing or decreasing number of organizations, for example, a decrease in small and medium-sized businesses;
- market density of interacting structures;
- fluctuations in the proportion of market entities;
- the absence or presence of representative power, the possibility of material influence;
- Association and consolidation of leading market players;
- the quality of the relationship between oligopolists exposed to imperfect competition.
In fact, the more accurately each merger or acquisition is investigated, taking into account the conditional vertical (producer-consumer) and horizontal (producer-competitor of another manufacturer), the better for the improvement and development of the domestic market and market relations.
Often, economic concentration restrains unfair competition, contributes to the development of new sectors of the national economy, but often also causes irreparable harm to many business entities, especially when it comes to collusion and secret transactions.
The main task of regulation and development of control is to create market entities regimes of legal interactions between direct competitors - business organizations with consumers.
For a wider coverage of the entire spectrum of the concept under consideration, additional antimonopoly probes may well be required.
For example, such as the creation of new communication industries in order to improve antitrust laws. Separation of levels of inspections, depending on the sector of the economy, where the strengthening or weakening of the process of economic concentration can be observed.