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ACCA Strategic Professional · Advanced Financial Management · Regulatory framework and processes

A proposed merger between two large airlines in the same region is referred to the national competition authority. Which of the following is the primary concern the authority is most likely to assess when deciding whether to block the deal?

The authority mainly assesses whether the merger would substantially lessen competition in the relevant market. Competition regulators protect consumers and market rivalry, so they examine market share and concentration. Premiums, payment method and EPS effects concern shareholders and are not the core regulatory test.

  1. AWhether the merger would substantially lessen competition in the relevant marketCorrect
  2. BWhether the acquirer will pay a premium above the target's market price
  3. CWhether the target's shareholders prefer cash to share consideration
  4. DWhether the combined company will have a higher earnings per share

Explanation

Merger control focuses on market structure and consumer welfare. Authorities test whether the combination would substantially lessen competition, for example through high market share or reduced rivalry. The premium paid, payment method and EPS are financial matters for shareholders, not the regulator's test.

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