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

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Author Info
Jo Seldeslachts
Joseph A. Clougherty
Pedro Pita Barros

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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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Publisher 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
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Handle: RePEc:wzb:wzebiv:spii2007-02

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

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Find related papers by JEL classification:
L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
L49 - Industrial Organization - - Antitrust Issues and Policies - - - Other
K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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References listed on IDEAS
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    Other versions:
  5. Warzynski, Frederic, 2001. "Did tough antitrust policy lead to lower mark-ups in the US manufacturing industry?," Economics Letters, Elsevier, vol. 70(1), pages 139-144, January. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!]
  2. Andreea Cosnita & Jean-Philippe Tropeano, 2006. "On the effective design of the efficiency defence," Cahiers de la Maison des Sciences Economiques v06030, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
    Other versions:
  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). [Downloadable!]
    Other versions:
    • Tomaso Duso & Klaus Gugler & Burcin Yurtoglu, 2006. "How Effective is European Merger Control?," Discussion Papers 153, 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!]
  4. Fumagalli, Eileen & Nilssen, Tore, 2008. "Waiting to Merge," Memorandum 13/2008, Oslo University, Department of Economics. [Downloadable!]
  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. [Downloadable!] (restricted)
    Other versions:
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