The Impact of Mergers and Acquisitions on the Potential Anticompetitive Behaviors of a Firm: An Economic Legal Analysis

Abstract

Mergers and acquisitions are common strategies for business expansion, but they also carry the risk of enabling anti-competitive practices. This paper analyses the potential of engaging in anti-competitive practices before a company engages in M&A, such as predatory pricing, so that the competitor has no other option, but to sell the company to the dominant or superior firm. Vertical integrated firms can further exacerbate the impacts caused by the anticompetitive actions; due to the higher leverage it has to absorb the losses. This paper established its research by using normative legal analysis method and comparative and case-based approach. The objective of this research is to examine the legal gap in Indonesian competition law concerning pre-merger anti-competitive behavior, particularly predatory pricing, and to propose legal reforms to ensure more comprehensive oversight of merger activities. The case of Amazon-Quidsi is used as a comparative case, highlighted the importance of the supervision of anti-competitive actions during pre-merger, in which the current Indonesian Law No. 5 1999 only highlights the anti-competitive possibilities during post-M&A. Therefore, this paper has established that pre-merger anticompetitive practices, such as predatory pricing, pose a threat to fair competition and is insufficiently regulated under current Indonesian competition law. Based on this analysis, the paper proposes specific legal reforms, targeting to minimize the regulatory gaps to ensure efficient oversight of merger activities from pre-merger stage.