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An empirical assessment of the 2004 EU merger policy reform

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  • Duso, Tomaso
  • Gugler, Klaus
  • Szücs, Florian

Abstract

We propose a general framework to assess merger policy effectiveness based on standard oligopoly theory and stock market reactions. We focus on four different dimensions of effectiveness: 1) legal certainty, 2) decision errors, 3) reversion of anti-competitive rents, and 4) deterrence. We apply this framework to 368 merger cases scrutinized by the European Commission (EC) between 1990 and 2007. To evaluate the economic impact of the change in European merger legislation, we compare the results of the four tests before and after its introduction in 2004. Our results suggest that the 'more economic approach' resulted in improved ex-ante predictability of decisions and a reduction of the frequency of type I errors. Merger policy enforcement deters anti-competitive mergers without over-deterring pro-competitive transactions. Yet, the policy shift away from prohibitions, which are effective as a policy tool and as a deterrent mechanism, does not seem to be well-grounded. --

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Bibliographic Info

Paper provided by Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) in its series DICE Discussion Papers with number 58.

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Date of creation: 2012
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Handle: RePEc:zbw:dicedp:58

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

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Cited by:
  1. 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.
  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. Budzinski, Oliver, 2012. "Impact evaluation of merger control decisions," Ilmenau Economics Discussion Papers 75, Ilmenau University of Technology, Institute of Economics.
  4. Oliver Budzinski, 2011. "Impact Evaluation of Merger Decisions," Working Papers 112/11, University of Southern Denmark, Department of Environmental and Business Economics.

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