3(2).The International Merger Movement and Developing Countries
The foregoing examination of the causes and effects of the current international merger movement raises important concerns for developing countries. First,there are the obvious questions of increased market power of large multinationals and their potential abuse of dominance. Developing countries are clearly affected directly by the monopoly power effects of international mergers when a foreign multinational acquires a domestic firm. However, they are also affected indirectly even when mergers take place outside their jurisdictions, e.g. within advanced countries themselves. The "rule of being in the top three", as Tichy argues, reduces the contestability of markets and is especially harmful to the interests of late industrialising countries whose firms are building up their capabilities to compete in international markets. The reduced contestability of markets is therefore of special concern for developing countries.
Developing countries clearly need a competition policy in order to be able to deal with these issues of market dominance and abuse of dominant positions.However, even with such legislation on the statute books these countries may not have the power to restrain cartels and other uncompetitive conduct by large multinationals, owing to inadequate development of the legal and institutional framework, lack of information and difficulties of proving that prices an being manipulated by international cartels. It has become conventional to underplay the practical significance of cartels presumably on the ground that these arrangements tend to be short lived and their incidence is quite low. However,the US anti-trust authorities, which have long held a strong anti-cartel position,made their stance even stronger in the early 1990s. By the end of the decade the US position was accepted by EU and other advanced countries.Consequently, several industrial countries have passed legislation to stiffen the penalties for participation in illegal cartels. It is also increasingly recognized that the illegal cartels that are actually detected and prosecuted are merely the tip of a large iceberg.21 Recently, the US government fined participants in a European vitamin’s cartel a record sum of seven hundred and fifty million dollars. If such cartels can operate in an economy like that of the US, with its long history of anti-trust laws and their enforcement, it is more than likely that their incidence will be quiet high in developing countries.