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The Political Economy of European Merger Control: Evidence using Stock Market Data

Listed author(s):
  • Tomaso Duso
  • Damien J. Neven
  • Lars-Hendrik Röller

The objective of this paper is to investigate the determinants of European Union (EU) merger control decisions. We consider a sample of 167 EU mergers between 1990 and 2002 and evaluate their competitive consequences by the reaction of the stock market price of competitors to the merging firms. We then account for the discrepancies between the actual and optimal decisions as indicated by the stock market in terms of the political economy surrounding the cases. Our results suggest that the commission’s decisions cannot be solely accounted for as protecting consumer surplus. The institutional and political environment does matter. As far as influence is concerned, however, our data suggest that the commission’s decisions are not sensitive to firms’ interests. Instead, the evidence suggests that other factors—such as market definition and procedural aspects, as well as country and industry effects—do play a significant role.

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File URL: http://dx.doi.org/10.1086/519812
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Article provided by University of Chicago Press in its journal The Journal of Law and Economics.

Volume (Year): 50 (2007)
Issue (Month): ()
Pages: 455-489

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Handle: RePEc:ucp:jlawec:v:50:y:2007:p:455-489
DOI: 10.1086/519812
Contact details of provider: Web page: http://www.journals.uchicago.edu/JLE/

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  1. 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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  6. 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.
  7. Malcolm B. Coate, 2002. "A Test of Political Control of the Bureaucracy: The Case of Mergers," Economics and Politics, Wiley Blackwell, vol. 14(1), pages 1-18.
  8. Coate, Malcolm B & McChesney, Fred S, 1992. "Empirical Evidence on FTC Enforcement of the Merger Guidelines," Economic Inquiry, Western Economic Association International, vol. 30(2), pages 277-293, April.
  9. Mark L. Sirower & Stephen F. O'Byrne, 1998. "The Measurement Of Post-Acquisition Performance: Toward A Value-Based Benchmarking Methodology," Journal of Applied Corporate Finance, Morgan Stanley, vol. 11(2), pages 107-121.
  10. Fridolfsson, Sven-Olof & Stennek, Johan, 2000. "Why Event Studies Do Not Detect Anti-Competitive Mergers," Working Paper Series 542, Research Institute of Industrial Economics.
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  16. Röller, Lars-Hendrik & Stennek, Johan & Verboven, Frank, 2000. "Efficiency Gains from Mergers," Working Paper Series 543, Research Institute of Industrial Economics.
  17. Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring.
  18. McAfee, R. Preston & Williams, Michael A., 1988. "Can event studies detect anticompetitive mergers?," Economics Letters, Elsevier, vol. 28(2), pages 199-203.
  19. 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 119-149, April.
  20. Neven, Damien J., 2001. "How should "protection" be evaluated in Article III GATT disputes?," European Journal of Political Economy, Elsevier, vol. 17(2), pages 421-444, June.
  21. Khemani, R S & Shapiro, Daniel M, 1993. "An Empirical Analysis of Canadian Merger Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 161-177, June.
  22. George L. Mullin & Joseph C. Mullin & Wallace P. Mullin, 1995. "The Competitive Effects of Mergers: Stock Market Evidence from the U.S. Steel Dissolution Suit," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 314-330, Summer.
  23. Healy, Paul M. & Palepu, Krishna G. & Ruback, Richard S., 1992. "Does corporate performance improve after mergers?," Journal of Financial Economics, Elsevier, vol. 31(2), pages 135-175, April.
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