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Merger Remedies at the European Commission: A Multinomial Logit Analysis

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Author Info
Bougette, Patrice
Turolla, Stéphane

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Abstract

This paper aims to build and empirically evaluate a discrete choice model of merger remedies as a basis for policy analysis. The database consists of 229 merger cases accepted in Phase I or Phase II of the European merger process between 1990 and 2005. We focus on the following question: Which merging firms' characteristics lead the European Commission to decide whether to require conditional acceptance? Although a lot of empirical studies have been carried out these last years, ours is distinguished by at least two original features. First, we explore determinant factors of the Commission's decisions with a neural network model differentiating cases accepted with or without remedies (either structural or behavioral). Secondly, we implement three multinomial logit models. We find that variables related to high market power lead more frequently to a remedy outcome, whatever the phase. Innovative industries such as energy, transportation and communications positively affect the probability of a behavioral remedy. Lastly, former Competition Commissioner Mario Monti's policy appears to be pro-remedy, i.e. seeking concessions from merging parties.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2461.

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Date of creation: Sep 2006
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Handle: RePEc:pra:mprapa:2461

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Related research
Keywords: Merger Remedies Antitrust European Commission Discrete Choice Models Self-Organizing Maps

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Find related papers by JEL classification:
L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation

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  1. Brady, Una & M. Feinberg, Robert, 2000. "An examination of stock-price effects of EU merger control policy," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 885-900, August. [Downloadable!] (restricted)
  2. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May. [Downloadable!] (restricted)
  3. Coate, Malcolm B & Higgins, Richard S & McChesney, Fred S, 1990. "Bureaucracy and Politics in FTC Merger Challenges," Journal of Law & Economics, University of Chicago Press, vol. 33(2), pages 463-82, October.
  4. Posner, Richard A, 1970. "A Statistical Study of Antitrust Enforcement," Journal of Law & Economics, University of Chicago Press, vol. 13(2), pages 365-419, October.
  5. Siegfried, John J, 1975. "The Determinants of Antitrust Activity," Journal of Law & Economics, University of Chicago Press, vol. 18(2), pages 559-74, October.
  6. Khemani, R S & Shapiro, Daniel M, 1993. "An Empirical Analysis of Canadian Merger Policy," Journal of Industrial Economics, Blackwell Publishing, vol. 41(2), pages 161-77, June. [Downloadable!] (restricted)
  7. Asch, Peter, 1975. "The Determinants and Effects of Antitrust Activity," Journal of Law & Economics, University of Chicago Press, vol. 18(2), pages 575-81, October.
  8. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March. [Downloadable!] (restricted)
  9. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2, September. [Downloadable!]
  10. Bruce R. Lyons, 2004. "Reform of European Merger Policy," Review of International Economics, Blackwell Publishing, vol. 12(2), pages 246-261, 05. [Downloadable!] (restricted)
  11. Bergman, Mats A. & Jakobsson, Maria & Razo, Carlos, 2005. "An econometric analysis of the European Commission's merger decisions," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 717-737, December. [Downloadable!] (restricted)
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  12. Long, William F & Schramm, Richard & Tollison, Robert D, 1973. "The Economic Determinants of Antitrust Activity," Journal of Law & Economics, University of Chicago Press, vol. 16(2), pages 351-64, October.
  13. Duso, Tomaso & Neven, Damien J & Röller, Lars-Hendrik, 2003. "The Political Economy of European Merger Control: Evidence Using Stock Market Data," CEPR Discussion Papers 3880, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  14. Tomaso Duso & Klaus Gugler & Burcin Yurtoglu, 2006. "EU Merger Remedies: A Preliminary Empirical Assessment," Discussion Papers 81, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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  15. Weir, Charlie, 1992. "Monopolies and Mergers Commission, Merger Reports and the Public Interest: A Probit Analysis," Applied Economics, Taylor and Francis Journals, vol. 24(1), pages 27-34, January.
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