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Discrepancies Between Markets and Regulators: an Analysis of the First ten Years of EU Merger Control

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Abstract

This paper gathers evidence on apparent discrepancies between EU decisions and stock market's anticipations of the anti-competitive consequences of particular mergers. We consider a sample of about 100 mergers, which include all phase II cases, and explore some of the factors that may account for such discrepancies. Overall, we find a low frequency of type I discrepancies, i.e. relatively few instances where the Commission has prohibited a merger that the market had anticipated as being pro-competitive. By contrast, we observe a high frequency of type II discrepancies, i.e. relatively numerous instances where the Commission failed to block or to impose remedies on mergers that the market had anticipated to be anti-competitive. We argue that type II discrepancies could be associated with the scope of the dominance concept, the lack of an explicit efficiency defence or the political economy of merger control, such that the Commission has not pursued the objective that it has been assigned. By contrast, type I discrepancies can only be associated with the political economy of merger control. Considering the pattern of discrepancies (across countries, across incentives to influence the Commission and over time), some preliminary observations reveal that competitors may play an important role in favour of anti-competitive deals but surprisingly not against pro-competitive mergers, that discrepancies are more frequent in phase I and possibly when large countries are involved.

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Bibliographic Info

Paper provided by Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 10-2002.

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Length: 33
Date of creation: Aug 2002
Date of revision:
Handle: RePEc:gii:giihei:heiwp10-2002

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Keywords: International Economics; Anti trust; Mergers;

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References

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  1. 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.
  2. G. William Schwert, 1996. "Mark-Up Pricing in Mergers and Acquisitions," NBER Working Papers 4863, National Bureau of Economic Research, Inc.
  3. Fridolfsson, Sven-Olof & Stennek, Johan, 2000. "Why Event Studies Do Not Detect Anti-Competitive Mergers," Working Paper Series 542, Research Institute of Industrial Economics.
  4. Neven, Damien J. & Roller, Lars-Hendrik, 2005. "Consumer surplus vs. welfare standard in a political economy model of merger control," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 829-848, December.
  5. Lars-Hendrik Röller & Johan Stennek & Frank Verboven, 2000. "Efficiency Gains from Mergers," CIG Working Papers FS IV 00-09, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  6. 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.
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Cited by:
  1. Ivaldi, Marc & Verboven, Frank, 2001. "Quantifying the Effects from Horizontal Mergers in European Competition Policy," CEPR Discussion Papers 2697, C.E.P.R. Discussion Papers.
  2. Sunel Grimbeek & Steven F. Koch & Richard J. Grimbeek, 2012. "The Consistency of Merger Decisions in a Developing Country: The South African Competition Commission," Working Papers 286, Economic Research Southern Africa.
  3. Arndt Christiansen and Wolfgang Kerber & Wolfgang Kerber, 2006. "Competition Policy with Optimally Differentiated Rules Instead of "Per se Rules vs. Rule of Reason"," Marburg Working Papers on Economics 200606, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  4. Bergman, Mats A. & Jakobsson, Maria & Razo, Carlos, 2003. "An Econometric Analysis of the European Commission's Merger Decisions," Working Paper Series 2003:6, Uppsala University, Department of Economics.
  5. Jrisy Motis, 2007. "Mergers and Acquisitions Motives," Working Papers 0730, University of Crete, Department of Economics.
  6. Fridolfsson, Sven-Olof & Stennek, Johan, 2005. "Hold-up of anti-competitive mergers," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 753-775, December.
  7. Massimo MOTTA & Helder VASCONCELOS, 2003. "Efficiency Gains and Myopic Antitrust Authority in a Dynamic Merger Game," Economics Working Papers ECO2003/23, European University Institute.
  8. Aktas, Nihat & Bodt, Eric de & Roll, Richard, 2004. "European M&A Regulation is Protectionist," University of California at Los Angeles, Anderson Graduate School of Management qt9gd3x41d, Anderson Graduate School of Management, UCLA.
  9. Jose-Antonio Garcia; Damien Neven, 2005. "The attempted merger between General Electric and Honeywell, a case study of transatlantic conflict," IHEID Working Papers 06-2005, Economics Section, The Graduate Institute of International Studies.
  10. Goran Serdareviæ & Petr Teplý, 2011. "The Efficiency of EU Merger Control During the Period 1990–2008," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 61(3), pages 252-276, July.

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