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Negotiating remedies : revealing the merger efficiency gains

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  • Andrea Cosnita

    ()
    (EUREQua)

  • Jean-Philippe Tropeano

    ()
    (EUREQua)

Abstract

This paper aims to contribute to the normative economic analysis of mergers by taking into account the possible efficiency gains for the design of structural merger remedies. We show that a larger asset transfer should be requested from a less efficient merged firm than from a more efficient one, which comforts the proportionality principle advocated by competition policy practitioners. However, since cost savings are private information of merging firms, the Competition Authority will require them to reveal their efficiency gains, so as to tailor the optimal remedy. We propose a revelation mechanism combining the use of divestitures with the regulation of asset sale prices. We discuss the opportunity of such an instrument, and argue that in practice Competition Authorities might be entiled to infer a lot from the sale price of divestitures.

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Bibliographic Info

Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number v05047.

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Length: 28 pages
Date of creation: Jun 2005
Date of revision: Apr 2006
Handle: RePEc:mse:wpsorb:v05047

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Keywords: Merger control; structural merger remedies; asymmetric information.;

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References

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  1. Luis Corchón & Ramon Fauli-Oller, 2004. "To merge or not to merge: That is the question," Review of Economic Design, Springer, vol. 9(1), pages 11-30, December.
  2. 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.
  3. Röller, Lars-Hendrik & Stennek, Johan & Verboven, Frank, 2000. "Efficiency Gains from Mergers," Working Paper Series 543, Research Institute of Industrial Economics.
  4. Joseph Farrell & Carl Shapiro, 1990. "Asset Ownership and Market Structure in Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 275-292, Summer.
  5. In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
  6. 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).
  7. Besanko, David & Spulber, Daniel F, 1993. "Contested Mergers and Equilibrium Antitrust Policy," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(1), pages 1-29, April.
  8. Bensaid, Bernard & Encaoua, David & Winckler, Antoine, 1994. "Competition, cooperation and mergers: Economic and policy issues," European Economic Review, Elsevier, vol. 38(3-4), pages 637-650, April.
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Citations

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Cited by:
  1. Ormosi, Peter L., 2012. "Tactical dilatory practice in litigation: Evidence from EC merger proceedings," International Review of Law and Economics, Elsevier, vol. 32(4), pages 370-377.
  2. Stephen Davies & Matthew Olczak, 2010. "Assessing the Efficacy of Structural Merger Remedies: Choosing Between Theories of Harm?," Review of Industrial Organization, Springer, vol. 37(2), pages 83-99, September.
  3. Juwon Kwak, 2013. "Merger settlement as a screening device," European Journal of Law and Economics, Springer, vol. 36(3), pages 523-540, December.
  4. Mariana Cunha & Paula Sarmento & Hélder Vasconcelos, 2014. "Uncertain Efficiency Gains and Merger Policy," FEP Working Papers 527, Universidade do Porto, Faculdade de Economia do Porto.
  5. Patrice Bougette, 2011. "Négociation d'engagements en matière de concentrations : une perspective d'économiste," Post-Print halshs-00580669, HAL.
  6. Bougette, Patrice, 2010. "Preventing merger unilateral effects: A Nash-Cournot approach to asset divestitures," Research in Economics, Elsevier, vol. 64(3), pages 162-174, September.
  7. Ormosi, Peter L., 2012. "Claim efficiencies or offer remedies? An analysis of litigation strategies in EC mergers," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 578-592.
  8. Emilie Dargaud, 2013. "Horizontal mergers, efficiency gains and remedies," European Journal of Law and Economics, Springer, vol. 36(2), pages 349-372, October.

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