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 7: Structure and Competitive Process in Pharmaceuticals Markets

Stephen Davies and Bruce Lyons


7.0 INTRODUCTION The purpose of this chapter is to provide the background for the detailed analysis of individual merger cases and remedies in the pharmaceuticals sector in Chapter 8. It is our view that a deep understanding of an industry is necessary both to identify an appropriate model suitable for estimating potential harm and remedy analysis, and to understand how the results of a necessarily simplified quantitative analysis should be interpreted sensitively. Since pharmaceuticals markets are so complex, this chapter is rather long and the reader may prefer to read it selectively. There are ten sections. The first three set the scene: Section 7.1 defines the industry/sector; Section 7.2 provides some brief information on broad aggregates and trends, and an assessment of the standing of the European industry in the world as a whole; and Section 7.3 identifies the leading firms, and describes their alternative corporate structures. After these preliminaries, the remainder of the chapter provides a detailed assessment of the nature of the competitive process in pharmaceuticals. This serves three purposes. First, it analyses the main modes of competition in the industry, which is the essential starting point in model selection. Second, it begins to quantify magnitudes that are often available for individual products, and so provides a first step towards calibration. Third, it sets out the very special and important regulatory context of pharmaceuticals, particularly in relation to the buying and remuneration policies of national health insurance authorities in Europe. 7.1 DEFINING THE SECTOR This...

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