Abstract
The way in which the Monopolies and Mergers Commission views effective competition when reaching decisions involving referred merger bids is examined. The objective is to identify issues which the Commission has highlighted as important and, hence, is concerned with subjective rather than objective characteristics. It is argued that an expected decrease in competition was a critical reason for having a bid disallowed, whereas bids which were expected to either increase competition or leave it unaffected, were likely to be allowed. The analysis then examines the cause of these differing competition conclusions, in particular, those relating to avoiding the Commission concluding that competition was likely to decrease. Probit analysis was used to estimate the relationships and it was found that for the increase/decrease competition sample the important variables were market share and price. In the decrease/no change in competition sample the significant variables were efficiency, the balance of payments, price, research and development and merger type. The sample consisted of 73 Commission merger reports covering the period 1974–90.