Mergers and Merger Remedies in the EU
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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.
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Chapter 3: Classification of Merger Remedies

Stephen Davies and Bruce Lyons


3. 3.0 Classification of merger remedies INTRODUCTION This chapter begins by summarizing the empirical classification of EC remedies, mainly into structural and behavioural, but also according to competitive concern. We go on to consider the value of this simple dichotomy and focus on two issues: the need to understand how any particular remedy affects competition in the market; and the details of remedy design as revealed by the clean break principle. 3.1 EMPIRICAL CLASSIFICATIONS OF REMEDIES The DG Competition study (2005) analysed in depth a sample of 40 of its merger decisions over the period 1996–2000. Because most European mergers involve more than one market, the number of markets in which remedies were applied was 96. The full population of its merger cases over these years involved 227 remedies. Although this is only a five-year subperiod, it includes disproportionately high shares of the full-period mergers and remedies, because of the intense activity in the late 1990s (see Figure 1.1). Table 3.1 lists the main types of remedy used. Broadly speaking, this taxonomy can be aligned with the structural/behavioural dichotomy: transferring a market position and exit from joint venture (JV), being divestment, are structural; granting access is behavioural; and long-term exclusive licences straddle the two, depending on the details of the agreement. ‘Transferring a market position’, or divestment in common parlance, is most frequent. The Commission says this is ‘aimed at re-creating the competitive strength of a business in the hands of a suitable purchaser who exercises...

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