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The Efficiency of EU Merger Control During the Period 1990–2008

The main goal of this paper is to empirically test the function of European merger control in light of the 2004 regulatory reform, which was expected to introduce a more efficient regulatory framework for the assessment of mergers within the EU. We use stock market data to identify cases where there are discrepancies between the European Commission’s decisions compared to market evaluations of the mergers in question. Using the PROBIT model, these cases are further investigated to discover the sources of these discrepancies. In line with previous studies, our results suggest that the discrepancies are caused by procedural and institutional factors. Nevertheless, the regulatory reform introduced in 2004 has, to some extent, enhanced the efficiency of European merger control in the sense that the Commission’s assessments of mergers under the new regulation are more consistent with the market evaluations. We found that the probability of an anti-competitive deal being cleared decreases significantly under the new regulatory framework. Nevertheless, the occurrence of unnecessary remedies has not decreased as the result of the new merger control system. To the authors’ best knowledge, this paper is the first study using stock market data to evaluate the recent reform of European merger control.

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Article provided by Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.

Volume (Year): 61 (2011)
Issue (Month): 3 (July)
Pages: 252-276

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Handle: RePEc:fau:fauart:v:61:y:2011:i:3:p:252-276
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  1. Bergman, Mats A. & Jakobsson, Maria & Razo, Carlos, 2005. "An econometric analysis of the European Commission's merger decisions," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 717-737, December.
  2. Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
  3. Cox, Alan J & Portes, Jonathan, 1998. "Mergers in Regulated Industries: The Uses and Abuses of Event Studies," Journal of Regulatory Economics, Springer, vol. 14(3), pages 281-304, November.
  4. Neven, Damien J. & Roller, Lars-Hendrik, 2005. "Consumer surplus vs. welfare standard in a political economy model of merger control," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 829-848, December.
  5. Lars-Hendrik Röller & Johan Stennek & Frank Verboven, 2000. "Efficiency Gains from Mergers," CIG Working Papers FS IV 00-09, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  6. Lagerlof, Johan N.M. & Heidhues, Paul, 2005. "On the desirability of an efficiency defense in merger control," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 803-827, December.
  7. Damien Neven, 2002. "Discrepancies Between Markets and Regulators: an Analysis of the First ten Years of EU Merger Control," IHEID Working Papers 10-2002, Economics Section, The Graduate Institute of International Studies.
  8. Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin B., 2006. "EU Merger Remedies: A Preliminary Empirical Assessment," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 81, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  9. Schwert, G.W., 1994. "Mark-up Pricing in Mergers and Acquisitions," Papers 95-01, Rochester, Business - Financial Research and Policy Studies.
  10. Tomaso Duso & Damien J. Neven & Lars-Hendrik Röller, 2002. "The Political Economy of European Merger Control: Evidence using Stock Market Data," CIG Working Papers FS IV 02-34, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  11. Katz, Lawrence & Duncan, Greg J. & Kling, Jeffrey R. & Kessler, Ronald C. & Ludwig, Jens & Sanbonmatsu, Lisa & Liebman, Jeffrey B., 2008. "What Can We Learn about Neighborhood Effects from the Moving to Opportunity Experiment?," Scholarly Articles 2766959, Harvard University Department of Economics.
  12. Tamás Bartus, 2005. "Estimation of marginal effects using margeff," Stata Journal, StataCorp LP, vol. 5(3), pages 309-329, September.
  13. Ari Hyytinen & Pekka Ilmakunnas, 2007. "What distinguishes a serial entrepreneur?," Industrial and Corporate Change, Oxford University Press, vol. 16(5), pages 793-821, October.
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