A concentration is the legal combination of two or more undertakings, by merger or acquisition. While such operations may have a positive impact on the market, they may also appreciably restrict competition, by creating or strengthening a dominant player.
In order to preclude restrictions of competition, the European Commission exercises control over planned concentrations with a Community dimension (i.e. when the operation extends beyond the borders of a Member State and exceeds certain worldwide and Community-wide turnover thresholds) and may authorise them subject to conditions or forbid them.
In determining whether a concentration is compatible with the common market, the Commission takes account on a case-by-case basis of several factors, such as the concepts of “Community dimension”, “dominant position”, “effective competition” and “relevant market”. The basic criterion used to analyse concentrations is that of a “dominant position”. One or more undertakings are said to hold a dominant position if they have the economic power to influence the parameters of competition, especially prices, production, product quality, distribution and innovation, and to limit competition to an appreciable extent.
Regulation (EC) No 139/2004, which entered into force on 1 May 2004, radically recast the Community rules for control of concentrations.
Source: Glossary of EU Law