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An Empirical Assessment of the 2004 EU Merger Policy Reform

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Author Info

  • Tomaso Duso
  • Klaus Gugler
  • Florian Szücs

Abstract

Based on a database of 326 merger cases scrutinized by the European Commission between 1990 and 2007, we evaluate the economic impact of the change in Euro-pean merger legislation in 2004. We first propose a general framework to assess merger policy effectiveness, which is based on standard oligopoly theory and makes use of stock market reactions as an external assessment of the merger and the merger control decisions. We then focus on four different dimensions of effec-tiveness: 1) legal certainty; 2) frequency and determinants of type I and type II er-rors; 3) rent-reversion achieved by different merger policy tools; and 4) deterrence of anti-competitive mergers. To infer the economic impact of the merger policy reform, we compare the results of our four tests before and after its introduction. Our results suggest that the policy reform seems to have been only a modest im-provement of European merger policy. ZUSAMMENFASSUNG - Eine empirische Bewertung der in 2004 eingeführten Reform der Europäischen Fusionskontrolle - Basierend auf einer Stichprobe von 326 Fusionsfällen, welche der Europäischen Kommission zwischen Januar 1990 und Dezember 2007 vorlagen, wird in diesem Beitrag die Wirkung der in Mai 2004 eingeführten neuen Regulierung für Firmenfusionen erforscht. Zuerst wird ein allgemeiner Ansatz vorgeschlagen, um die Effektivität der Fusionskontrolle zu evaluieren, welcher auf der Oligopoltheorie beruht und Fusionen und Fusionskontrollentscheidungen anhand der Reaktionen von Aktienmärkten bewertet. Vier unterschiedliche Aspekte der Effektivität der Fusionskontrolle werden dann untersucht: 1) die Rechtssicherheit, 2) die Häufigkeit und Determinanten von Entscheidungsfehlern erster und zweier Ordnung seitens der Kommission, 3) die effektive Reduzierung der wettbewerbswidrigen Wirkungen von Fusionen, erzielt von unterschiedlichen wettbewerbspolitischen Instrumenten und 4) die Abschreckung von wettbewerbsschädigenden Fusionen. Um die Wirking der neuen Regulierung abzuschätzen, werden die Resultate der vier Tests vor und nach der Einführung der Reform verglichen. Die Ergebnisse zeigen, dass die Reform nur zu einer mäßigen Verbesserung der Europäischen Fusionskontrolle geführt hat.

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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 2010-16.

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Length: 60 pages
Date of creation: Nov 2010
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Handle: RePEc:wzb:wzebiv:spii2010_16

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Keywords: merger control; regulatory reform; EU Commission; event-study;

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References

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  1. Neven, Damien J & Röller, Lars-Hendrik, 2000. "Consumer Surplus vs. Welfare Standard in a Political Economy Model of Merger Control," CEPR Discussion Papers 2620, C.E.P.R. Discussion Papers.
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  6. Bougette, Patrice & Turolla, Stéphane, 2006. "Merger Remedies at the European Commission: A Multinomial Logit Analysis," MPRA Paper 2461, University Library of Munich, Germany.
  7. 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.
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  10. Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin, 2010. "Is the event study methodology useful for merger analysis? A comparison of stock market and accounting data," International Review of Law and Economics, Elsevier, vol. 30(2), pages 186-192, June.
  11. Klaus Gugler & Ralph Siebert, 2007. "Market Power versus Efficiency Effects of Mergers and Research Joint Ventures: Evidence from the Semiconductor Industry," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 645-659, November.
  12. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, December.
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Citations

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Cited by:
  1. Budzinski, Oliver, 2012. "Impact evaluation of merger control decisions," Ilmenau Economics Discussion Papers 75, Ilmenau University of Technology, Institute of Economics.
  2. 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.
  3. Oliver Budzinski, 2011. "Impact Evaluation of Merger Decisions," Working Papers 112/11, University of Southern Denmark, Department of Environmental and Business Economics.
  4. Ghosal Vivek, 2011. "The Law and Economics of Enhancing Cartel Enforcement: Using Information From Non-Cartel Investigations to Prosecute Cartels," Review of Law & Economics, De Gruyter, vol. 7(2), pages 501-538, December.

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