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The Political Economy of European Merger Control: Evidence Using Stock Market Data

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  • Duso, Tomaso
  • Neven, Damien J
  • Röller, Lars-Hendrik

Abstract

The objective of this Paper is to investigate the determinants of EU merger control decisions. We consider a sample of 164 EU merger control decisions and evaluate the anti-competitive consequences of these mergers from the reaction of the stock market price of competitors to the merging firms. We then account for the discrepancies between the actual decisions and what the stock market would have dictated in terms of the political economy surrounding the cases. Our results suggest that the commission’s decisions cannot be solely accounted for by the motive of protecting consumer surplus. The institutional and political environment does matter. As far as firms’ influence is concerned, however, our data suggests that the commission’s decisions are not sensitive to firms’ interests. Instead, the evidence suggests that other factors – such as country and industry effects, as well as market definition and procedural aspects – do play significant roles.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3880.

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Date of creation: Apr 2003
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Handle: RePEc:cpr:ceprdp:3880

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Keywords: mergers; political economy;

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  1. Röller, Lars-Hendrik & Stennek, Johan & Verboven, Frank, 2000. "Efficiency Gains from Mergers," Working Paper Series 543, Research Institute of Industrial Economics.
  2. Schwert, G.W., 1994. "Mark-up Pricing in Mergers and Acquisitions," Papers 95-01, Rochester, Business - Financial Research and Policy Studies.
  3. Khemani, R S & Shapiro, Daniel M, 1993. "An Empirical Analysis of Canadian Merger Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 161-77, June.
  4. Kaplan, Steven N & Weisbach, Michael S, 1992. " The Success of Acquisitions: Evidence from Divestitures," Journal of Finance, American Finance Association, vol. 47(1), pages 107-38, March.
  5. Salinger, M.A. & Schumann, L., 1988. "Horizontal Mergers And The Market Value Of Rivals: The In Play Effect," Papers fb-_88-03, Columbia - Graduate School of Business.
  6. Fridolfsson, Sven-Olof & Stennek, Johan, 2000. "Why Event Studies Do Not Detect Anti-Competitive Mergers," Working Paper Series 542, Research Institute of Industrial Economics.
  7. Damien J. Neven & Lars-Hendrik Röller, 2000. "Consumer Surplus vs. Welfare Standard in a Political Economy Model of Merger Control," CIG Working Papers FS IV 00-15, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  8. Stillman, Robert, 1983. "Examining antitrust policy towards horizontal mergers," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 225-240, April.
  9. Neven, Damien J., 2001. "How should "protection" be evaluated in Article III GATT disputes?," European Journal of Political Economy, Elsevier, vol. 17(2), pages 421-444, June.
  10. Malcolm B. Coate, 2002. "A Test of Political Control of the Bureaucracy: The Case of Mergers," Economics and Politics, Wiley Blackwell, vol. 14(1), pages 1-18.
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