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 8: Assessment of Remedies Adopted by the EC in Pharmaceuticals Mergers

Stephen Davies and Bruce Lyons


1 8.0 INTRODUCTION AND OVERVIEW This chapter considers the choice and impact of remedies required by the European Commission. It uses the benchmarking methodology outlined in Chapter 3 to investigate the ex ante choice of remedy whenever this might be relevant. However, given the extensive review of pharmaceuticals competition set out in Chapter 7, simple simulation techniques are not always appropriate in this industry. The equivalent task in the presence of buyers who have such an influence on prices should be a complementary analysis of how the direct and indirect effects of the price regulation process would be affected by the merger and its proposed remedy. Unfortunately, the documents at our disposal did not allow us to do this. In this chapter, we also introduce an experimental new model which aims to explain the incentives and price consequences of a merger involving a pipeline product. Unlike standard models reviewed in Chapter 3, it is consistent with the pricing results in an unregulated market (see Chapter 7) and it draws out the incentive to suppress or introduce the pipeline product under different ownerships. However, it is currently insufficiently developed to be able to rely on it as a practical simulation model. The range of cases, markets and simulation techniques applied is summarized in Table 8.1. Sections 8.1–8.5 review these cases in detail. Section 8.6 draws some conclusions for merger appraisal and remedy in pharmaceuticals markets. Some more general conclusions on the simulation methodology are reserved for...

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