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Remedy for Now but Prohibit for Tomorrow: The Deterrence Effects of Merger Policy Tools

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  • Jo Seldeslachts
  • Joseph A. Clougherty
  • Pedro Pita Barros

Abstract

Antitrust policy involves not just the regulation of anti-competitive behavior, but also an important deterrence effect. Neither scholars nor policymakers have fully researched the deterrence effects of merger policy tools, as they have been unable to empirically measure these effects. We consider the ability of different antitrust actions - Prohibitions, Remedies, and Monitorings - to deter firms from engaging in mergers. We employ cross-jurisdiction/pan-time data on merger policy to empirically estimate the impact of antitrust actions on future merger frequencies. We find merger prohibitions to lead to decreased merger notifications in subsequent periods, and remedies to weakly increase future merger notifications: in other words, prohibitions involve a deterrence effect but remedies do not. ZUSAMMENFASSUNG - (Auflagen heute, Untersagung morgen: Abschreckungswirkung von Wettbewerbs-intrumenten) Wettbewerbspolitik ist nicht nur Regulierung von wettbewerbsfeindlichem Verhalten, sondern hat auch eine wesentliche Abschreckungswirkung. Weder Wissenschaftler noch politische Entscheidungsträger haben die Abschreckungswirkung von Wettbewerbspolitik vollständig untersucht, da es sehr schwierig ist diese Wirkung empirisch nachzuweisen. Wir untersuchen die Wirkung verschiedener wettbewerbspolitischer Maßnahmen - Untersagung, Auflagen und Monitoring - um Unternehmen von Zusammenschlüssen abzuhalten. Wir nutzen einen Panel-Datensatz, um den Einfluss von Wettbewerbspolitik auf die künftige Anzahl von Firmenzusammenschlüssen zu bewerten. Wir zeigen, dass die Untersagung von Zusammenschlüssen die Fusionsankündigung in der Zukunft reduziert, und dass Fusionsauflagen künftige Ankündigungen schwach ansteigen lassen. Anders gesagt: Untersagungen haben eine führen zu Abschreckungswirkung, Auflagen nicht.

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Bibliographic Info

Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number SP II 2007-02.

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Length: 51 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:wzb:wzebiv:spii2007-02

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Keywords: merger policy tools; deterrence effects; cross-section/time-series data;

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References

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Citations

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Cited by:
  1. repec:hal:cesptp:halshs-00113503 is not listed on IDEAS
  2. Oliver Budzinski, 2010. "An Institutional Analysis of the Enforcement Problems in Merger Control," Working Papers 101/10, University of Southern Denmark, Department of Environmental and Business Economics.
  3. Tomaso Duso & Klaus Gugler & Burçin Yurtoglu, 2006. "How Effective is European Merger Control?," CIG Working Papers SP II 2006-12, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  4. Cosnita-Langlais, Andreea & Tropeano, Jean-Philippe, 2012. "Do remedies affect the efficiency defense? An optimal merger-control analysis," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 58-66.
  5. Jan Loecker & Jozef Konings & Patrick Cayseele, 2008. "Merger Review: How Much of Industry is Affected in an International Perspective?," Journal of Industry, Competition and Trade, Springer, vol. 8(1), pages 1-19, March.
  6. Pedro P. Barros & Joseph A. Clougherty & Jo Seldeslachts, 2009. "How to Measure the Deterrence Effects of Merger Policy: Frequency or Composition?," CIG Working Papers SP II 2009-13, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG), revised Oct 2009.
  7. repec:hal:journl:halshs-00113503 is not listed on IDEAS
  8. Fumagalli, Eileen & Nilssen, Tore, 2008. "Waiting to Merge," Memorandum 13/2008, Oslo University, Department of Economics.
  9. Oliver Budzinski, 2009. "Modern Industrial Economics and Competition Policy: Open Problems and Possible Limits," Working Papers 93/09, University of Southern Denmark, Department of Environmental and Business Economics.

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