ACCA Applied Knowledge · Business and Technology · Political and legal factors affecting business
A government regulator is reviewing a proposed takeover between two of the three largest supermarket chains in a country. Which is the main reason the regulator would examine the deal?
The regulator examines the takeover mainly to assess whether the combined supermarket would substantially lessen competition and harm consumers through higher prices or less choice. Fairness of price and dividend levels are commercial or company law matters, not competition policy concerns.
- ATo confirm that the acquirer will pay a fair price to the target's shareholders
- BTo assess whether the combined firm would substantially lessen competition and harm consumersCorrect
- CTo ensure that the combined firm will increase its dividends to shareholders
Explanation
Merger control exists to prevent combinations that create or strengthen market dominance and reduce competition, which could lead to higher prices or less choice. Fair price to shareholders and dividends are commercial matters, not the focus of competition policy.
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