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Related Persons, Leniency & Mergers Class 10
By: Mohamed ElFarDLA Piper - Egypt
Article 5 of the Executive Regulations of the ECLRelated Parties
that are composed of;
two or more persons,
each of them has an independent legal personality,
where the majority of stocks or shares of one of them is owned,
directly or indirectly, by the other party; or,
where the majority of stocks or shares in both parties are owned
by one party.
Related parties also include the person or persons who are
subject to the actual control of another person. Actual control
means every arrangement, agreement or ownership of stocks or
shares, regardless of its percentage, in a manner that leads to the
control of the management or decisions-taking.
Related PersonsSingle Economic Unit
Types of control:
De jure (Ownership of more than 50% shares, Veto rights)
De facto (BSkyB Case)
Responsibility of the Parent Company.
Leniency In case of committing any of the crimes mentioned in
Articles (6) and (7) of this Law, the court may exempt, up to the
half of the sanction decided thereby, violators who take the
initiative to inform the Authority of the offence and submit the
supporting evidence, and for those whom the Court considers to have
contributed to disclosing and establishing the elements of the
offense at any stage of inquiry, search, inferences gathering,
interrogation and trial processes.
Old Leniency Old Leniency Program
No automatic immunity.
50% discount in the final penalty.
Does not differentiate between whistle blower and those who come
after.
The New Leniency ProgramIn case any of the agreements or
contracts prohibited under Article 6 of this Law were commented,
the first person to come on its own initiative to inform the
Authority and to hand all the supporting evidence at hand and
remains fully cooperative with the Authority during the inspection
stage and this is before requesting to move the criminal action or
taken any related action shall be immune from the sanctions
stipulated in this Law.
In all cases, this immunity does not apply to the persons in
this cartel who were promoting and/or advocating its presence.The
Court may exempt up to 50% of the sanction imposed to any person
who did not benefit from the immunity granted in the previous
paragraph of this Article so long as it contributed in discovering
and proving the characteristics of this crime during any stage.
MergersHorizontal Mergers
Significant Impediment to Effective Competition, in particular,
the creation or strengthening of a dominant position. (SIEC)
Herfindahl Hirschman Index (HHI)
Theories of Harm:
Non-coordinated EffectsCoordinated Effects
Non-Coordinated Effects (Unilateral Effects)
Factors Taken into Consideration:
High market shares of merging firms
The merging firms are close competitors
Limited possibilities for customers to switch
Competitors will unlikely be able to increase supply if prices
increase.
Coordinated EffectsRequires the following;
Monitoring Mechanism
Deterrent Mechanism
High Entry Barriers
Vertical MergersNon-coordinated EffectsInput ForeclosureCustomer
Foreclosure
To assess whether there will be foreclosure;Ability to foreclose
Incentive to forecloseEffect on competition
Coordinated Effects
Conglomerate MergersNon-coordinated and coordinated effects
Questions?
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