Original scientific paper
Assessment of concentrations of undertakings applying a failing firm defence in times of recession
Vlatka Butorac Malnar
; Faculty of law, University of Rijeka, Rijeka, Croatia
Jasminka Pecotić Kaufman
orcid.org/0000-0002-3598-7090
; Faculty of economics and business, University of Zagreb, Zagreb, Croatia
Abstract
The supervision of concentrations of undertakings is carried out in order to prevent the formation of anti-competitive market structures following the concentration, which may negatively impact competition on the pertinent market. However, in some cases a concentration having a negative impact on competition, which should for these reasons be prohibited, will be permitted as causation between the concentration and the disruption of competition following that concentration cannot be established. This refers to situations
in which it can be proved that a party to the concentration is in such financial difficulty that it would disappear from the market regardless of the concentration, meaning that the disruption of competition would inevitably occur. The failing firm defence stems from
US case law and has been accepted in EU competition law, although the conditions required for its application are somewhat different. In the article the authors look at the conditions for the application of the failing firm defence in the United States, the EU and Croatia, noting that the conditions applied in the EU are more stringent than
those in the US, primarily due to the condition that the failing firm’s assets would inevitably exit the market. The authors further debate whether it is necessary to relax the criteria for approving concentrations of undertakings applying the failing firm defence
in times of recession, i.e. economic crises. The authors point to possible difficulties in establishing whether an undertaking is failing permanently or temporarily, due to recession. As concerns the failing firm defence in Croatian competition law, the authors
note that Croatian regulations and court practice have not been fully aligned with the acquis communautaire, mainly because the condition of inevitable exit of the firm’s assets from the market has not been accepted. The article also analyses the relevant practice of the Croatian Competition Agency. A separate issue dealt with in the article is one of groundedness of the application of EU legal rules for assessing concentrations of
undertakings in Croatian law, considering the fact that Article 70 of the Stabilisation and Association Agreement states that the criteria stemming from the application of competition rules in the EU apply only to agreements adversely affecting competition and
provision of state aid, and facilitating abuse of position. In answering this question, the authors look for inspiration in the judgement of the Constitutional Court of the Republic of Croatia in the P. Z. Auto case of 2008.
Keywords
competition law; concentrations of undertakings; failing firm defence; recession
Hrčak ID:
70315
URI
Publication date:
15.7.2011.
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