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 9: Conclusions and Recommendations

Stephen Davies and Bruce Lyons

Extract

9. 9.0 Conclusions and recommendations INTRODUCTION This book presents the results of our research into the competitive impact of merger remedies and how current practice can be improved. It provides a significant extension to the empirical literature by focusing on how basic simulation can be used as a practical methodology in this context. This is illustrated by detailed analysis of seven recent mergers in the paper and pharmaceuticals sectors. We also provide a substantial review of the emerging literature, which is currently very dispersed. This chapter summarizes our results and draws together our conclusions. In Section 9.1, we set out the three main objectives of our research. First, we wanted to develop a practical methodology for assessing the effectiveness of remedies agreed by a competition authority as a condition for allowing a merger to proceed. Second, because it is not possible to consider remedies without first assessing expected competitive harm, we wanted to compare our basic simulation methodology with the Commission’s starting point of market share analysis. Third, we wanted to take advantage of the parallel ex post study by DG Competition and modify our conclusions in the light of the practical problems of remedy implementation. Starting with the logically prior second of these, we set out our main finding on each in the following three sections. Section 9.4 then develops what we believe to be an appropriate and practical set of recommendations. 9.1 IDENTIFYING SIGNIFICANT IMPEDIMENT TO EFFECTIVE COMPETITION (SIEC): BASIC SIMULATION VERSUS THE COMMISSION’S MARKET SHARE...

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