When mergers take place in the country and by extension the region, they can have a positive impact but when they are not closely scrutinised they can result in harmful effects on consumers and the economy. These sentiments were echoed yesterday by Permanent Secretary in the Ministry of Trade and Industry, Norris Herbert.
Speaking at a Competition Law and Merger Policy Workshop, Herbert said: “A merger can be an opportunity for a business to expand, diversify and access new markets both geographically and product-wise.”
He continued: “Unfortunately, there are also situations where a merger may have harmful effects on consumers and on the economy as a whole, which may lead to higher prices, lower quality of goods and services and thus a decrease in consumer welfare.”
Hebert defined a merger as “an amalgamation or joining of two or more firms into an existing firm or to form a new firm.” According to Herbert, there are many reasons why a business will acquire or merge with another business - where the most common factor is the potential growth for the business and the prospect of increased market share.
However, he noted that the benefits of most mergers outweigh the harmful effects. Herbert added that mergers and acquisitions are cost-effective and can lead to greater efficiency and productivity, while also helping to achieve sustainable growth.
Nonetheless, anti-competitive mergers, said Herbert, can result in very large costs to consumers and to the economy in general. This is why “it is essential that there be a proper merger review system in place,” Herbert noted.
The potential benefits and anticompetitive effects of a merger dictate that staff in competition agencies be properly trained in the area of merger review and analysis.
According to the CARICOM Competition Commissions Commissioner, Emalene Marcus-Burnett, “The region must ensure that there is the requisite regulatory and legislative frameworks, buttressed by training and capacity building.”
Marcus-Bernett said that as globalization progresses and “firms seek to enhance their economies of scale and secure markets, it is expected that mergers will continue and become more complex.”
There have already been many mergers in the Caribbean, from telecom to finance. The most recent being the Jamaican National Commercial Bank’s majority acquisition of T&T’s Guardian Holdings Ltd.
Marcus-Burnett expressed that the Caricom region has not agreed on a harmonized platform for merger control policy and legislation, “which is necessary for that holistic approach to mergers, given their cross border implications”. She noted that such a policy is imperative as the region seeks to strengthen and deepen the implementation of the single market component of the CSME.
She noted that in spite of not having a harmonsed merger control policy, training and capacity building will continue to ensure that merger transactions “do not distort and hamper competition in affected markets.”
Harmonized procedures for the assessment of transactions, according to Marcus-Burnett, reduce operational delays, facilitate cooperation between authorities in the region and aid overall decisions relating to mergers.