Economic Theory and Competition Law
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Economic Theory and Competition Law

Edited by Josef Drexl, Laurence Idot and Joël Monéger

The context for this book is the increasingly complex relationship between economic theory and competition law which gives rise to lively political and academic debate on the direction competition law should take in a more global and innovation-oriented market place.
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Chapter 13: Efficiency in Merger Law: Appropriateness of Efficiency Analysis in Ex-ante Assessment?

Daniel Zimmer


13. Efficiency in merger law: appropriateness of efficiency analysis in ex-ante assessment? Daniel Zimmer* 1 PRESUMPTION OF EFFICIENCY OR INDIVIDUAL ASSESSMENT? We are aware of not just one way of taking into account efficiency considerations in merger control, but rather of two. We may distinguish a more general concept, sometimes referred to as the ‘general-presumption approach’, on the one hand, and an individual efficiency assessment on the other hand. The traditional ‘dominant-position’ test is often understood as being part of a general-presumption approach. There is, following this line of thought, a general presumption that mergers bring about some efficiency gains. If they did not, the argument goes, firms would not merge. This assumption is, however, highly dubious. It presumes rational conduct by directors in the best interests of their companies, and neglects motives such as personal vanity and management’s wish to be among the major firms in the market. According to a study by the consulting firm McKinsey, 70 per cent of mergers fail to achieve expected revenue synergies. In one quarter of the analysed transactions, managers overestimated cost synergies by at least 25 per cent.1 The idea of a general-presumption approach is that we take into account presumed efficiency, and thus a welfare-enhancing effect of a merger, by setting a relatively high threshold for prohibition: market dominance. If one does so, it seems logical that one should not recognize efficiency gains for a second time, by taking them into account on...

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