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How to Measure the Deterrence Effects of Merger Policy: Frequency or Composition?

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

Abstract

We show that the number of merger proposals (frequency-based deterrence) is a more appropriate indicator of underlying changes in merger policy than the relative anti-competitiveness of merger proposals (composition-based deterrence). This has strong implications for the empirical analysis of the deterrence effects of merger policy enforcement, and potential implications regarding how to reduce anti-competitive merger proposals. ZUSAMMENFASSUNG IDiese Studie vergleicht zwei Indikatoren zur Messung der Abschreckungswirkung von wettbewerbspolitischen Maßnahmen. Untersucht wird, welcher Indikator sich besser eignet, Veränderungen in der Strenge oder Laxheit von wettbewerbspolitischen Regimes abzubilden. Es lässt sich feststellen, dass der häufigkeitsbasierte Indikator, der die Anzahl von offiziellen Fusionsankündigungen misst, dazu besser geeignet ist als der zusammengesetzte Abschreckungsindikator, der die angekündigten Unternehmensfusionen im Hinblick auf ihre relative Wettbewerbsbeschränkung im Vergleich zu möglichen anderen Fusionen bewertet. Dieses Ergebnis hat Folgen für die empirische Analyse der Abschreckungseffekte, die eine effektive Fusionskontrolle haben sollte. Außerdem kann es Implikationen haben für die Frage, wie die offizielle Ankündigung von wettbewerbsreduzierenden Fusionen verhindert werden können.

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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 2009-13.

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Length: 15 pages
Date of creation: Oct 2009
Date of revision: Oct 2009
Handle: RePEc:wzb:wzebiv:spii2009-13

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Keywords: antitrust; deterrence; merger policy;

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References

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  1. Block, Michael K & Feinstein, Jonathan S, 1986. "The Spillover Effect of Antitrust Enforcement," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 122-31, February.
  2. Jo Seldeslachts & Joseph A. Clougherty & Pedro Pita Barros, 2007. "Remedy for Now but Prohibit for Tomorrow: The Deterrence Effects of Merger Policy Tools," CIG Working Papers SP II 2007-02, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  3. Eckbo, B Espen & Wier, Peggy, 1985. "Antimerger Policy under the Hart-Scott-Rodino Act: A Reexamination of the Market Power Hypothesis," Journal of Law and Economics, University of Chicago Press, vol. 28(1), pages 119-49, April.
  4. Bruce Lyons & Andrei Medvedev, 2007. "Bargaining over Remedies in Merger Regulation," Working Papers 07-3, Centre for Competition Policy, University of East Anglia.
  5. Tomaso Duso & Klaus Gugler & Burcin Yurtoglu, 2005. "EU Merger Remedies: A Preliminary Empirical Assessment," CIG Working Papers SP II 2005-16, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  6. D’Antoni, Massimo & Galbiati, Roberto, 2007. "A signaling theory of nonmonetary sanctions," International Review of Law and Economics, Elsevier, vol. 27(2), pages 204-218.
  7. Barros, Pedro Pita, 2003. "Looking behind the curtain--effects from modernization of European Union competition policy," European Economic Review, Elsevier, vol. 47(4), pages 613-624, August.
  8. Clarke, Julian L. & Evenett, Simon J., 2002. "The Deterrent Effects of National Anti-Cartel Laws: Evidence from the International Vitamins Cartel," Working paper 131, Regulation2point0.
  9. Jonathan B. Baker, 2003. "The Case for Antitrust Enforcement," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 27-50, Fall.
  10. Morgan, Eleanor, 2002. "Steering Mergers Through the EU's Regulatory Rocks:: Remedies Under the EU Merger Control Regulation," European Management Journal, Elsevier, vol. 20(5), pages 549-561, October.
  11. Sah, Raaj K, 1991. "Social Osmosis and Patterns of Crime," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1272-95, December.
  12. Eleanor Morgan, 2001. "A Decade of EC Merger Control," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(3), pages 451-473.
  13. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
  14. Robert W. Crandall & Clifford Winston, 2003. "Does Antitrust Policy Improve Consumer Welfare? Assessing the Evidence," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 3-26, Fall.
  15. Block, Michael Kent & Nold, Frederick Carl, 1981. "The Deterrent Effect of Antitrust Enforcement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 429-45, June.
  16. Jo Seldeslachts & Joseph A. Clougherty & Pedro Pita Barros, 2009. "Settle for Now but Block for Tomorrow: The Deterrence Effects of Merger Policy Tools," Journal of Law and Economics, University of Chicago Press, vol. 52(3), pages 607-634, 08.
  17. Eckbo, B Espen, 1992. " Mergers and the Value of Antitrust Deterrence," Journal of Finance, American Finance Association, vol. 47(3), pages 1005-29, July.
  18. Feinberg, Robert M, 1980. "Antitrust Enforcement and Subsequent Price Behavior," The Review of Economics and Statistics, MIT Press, vol. 62(4), pages 609-12, November.
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Cited by:
  1. Andreea Cosnita-Langlais & Lars Sørgard, 2014. "Enforcement vs Deterrence in Merger Control: Can Remedies Lead to Lower Welfare?," EconomiX Working Papers 2014-29, University of Paris West - Nanterre la Défense, EconomiX.

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