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.

Chapter 2: The Literature on Merger Remedies

Stephen Davies and Bruce Lyons

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


INTRODUCTION There is a small but growing literature on merger remedies, which is summarized in this chapter. The literature is quite new, with little published before 2001. This review also incorporates some elements of the wider literature on mergers, but only to the extent necessary to place the remedies literature in its appropriate context. Section 2.1 reviews some principles of what makes for a good remedy, and Section 2.2 reviews some remedy classifications. Our own taxonomy is set out in Chapter 3. The economic theory and some econometrics of merger remedies are reviewed in Section 2.3, and some special issues relating to high-technology mergers are set out in Section 2.4. Empirical work on the efficacy of remedies has been conducted mainly in house by the major competition authorities, and these studies are reviewed in Section 2.5. Particular attention is paid to the DG Competition study. Our review of newer approaches to remedy appraisal using simulation methods is reserved until Chapter 3. The perspective of transaction cost economics is introduced in Section 2.6, and in Section 2.7 we briefly consider the long-term limitations on merger remedies due to the wider economic forces that tend to determine long-run industrial structure. We close the chapter in Section 2.8 by outlining the ongoing debate about what are the regulatory objectives implicit in any policy of merger control. 2.1 PRINCIPLES OF A GOOD REMEDY The economics literature on principles is not large (for example, Lévêque and Shelanski, 2003; papers in...

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