Mergers and Merger Remedies in the EU

Mergers and Merger Remedies in the EU

Assessing the Consequences for Competition

Stephen Davies and Bruce Lyons

Headlines are made when the European Commission prohibits a merger, but this is actually very rare. Clearances subject to conditions (i.e. remedies) happen ten times as frequently, but have received far less attention in academic literature. This book provides an empirical assessment of the effectiveness of merger remedies, employing a novel simulation methodology based on formal economic theory. The authors were given unprecedented access to data available to case handlers, concerning a range of remedied mergers covering 21 markets. Using this they have adapted simple simulation techniques to appraise the competitive effects of these mergers and the impact of potential and actual remedies. Ex-ante results are then compared with ex-post impact to examine the actual effectiveness of remedies. The results provide a critique of both simple market share analysis and remedy design. This research thus contributes to economics research and practical merger policy.

Preface

Stephen Davies and Bruce Lyons

Subjects: economics and finance, competition policy, industrial economics, law - academic, european law

Extract

WHY THIS BOOK? Decisions prohibiting mergers always make the headlines. In practice, they are rare. The European Commission, for example, imposes remedies about ten times more often. Merger remedies are not only much more frequent; they are also more complex: predicting with reasonable certainty which elements will restore competition after completion of a merger and its related remedies is often a challenge. The concerns and the toolkits used when devising and monitoring remedies are close to those used in the regulatory field, for example when a public authority privatizes a state-owned (monopoly) business or auctions licences for new activities. Merger remedies can therefore blur the distinction between competition policy, regulatory policy and industrial policy. They can influence to different degrees the structure and performance, and hence competitiveness, of the industries concerned. Until recently, however, merger remedies have remained a neglected area. Inside the European Commission, we were encouraged to investigate the subject, following up on a seminar co-organized in 2002 by the French Ecole des Mines and the University of California Law School on the differences between US and EC approaches to merger remedies. One of the audience’s key messages was that the European Commission had to perform an ex post study comparable to the one performed by the US Federal Trade Commission (FTC) in 1996–99. After this conference, two departments of the European Commission took a particular interest in the topic. DG Enterprise tendered a study which Stephen Davies and Bruce Lyons won in the...