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Efficiency Gains and Structural Remedies in Merger Control

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  • Vasconcelos, Helder

Abstract

This paper studies the role of structural remedies in merger control in a Cournot setting where (endogenous) mergers are motivated by prospective efficiency gains and must be submitted to an Antitrust Authority (AA) which might require partial divestiture for approval. Both positive and negative effects of merger remedies are identified. First, structural remedies create new merger opportunities to firms. Second, when divestitures are required, the AA over-fixes, i.e., goes beyond the recreation of the level of competition that existed prior to the transaction. Finally, by insisting in over-fixing, the AA may discourage firms to look for more efficient mergers, inducing a final outcome where consumers' surplus is lower than if divestitures couldn't be required. Overall, however, structural remedies are shown to be good: consumers' surplus ex-ante is higher with than without remedies.

Suggested Citation

  • Vasconcelos, Helder, 2007. "Efficiency Gains and Structural Remedies in Merger Control," CEPR Discussion Papers 6093, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:6093
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    References listed on IDEAS

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    1. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919.
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    7. Motta, Massimo & Vasconcelos, Helder, 2005. "Efficiency gains and myopic antitrust authority in a dynamic merger game," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 777-801, December.
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    9. Cabral, Luis M. B., 2003. "Horizontal mergers with free-entry: why cost efficiencies may be a weak defense and asset sales a poor remedy," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 607-623, May.
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    11. Horn, Henrik & Persson, Lars, 2001. "The equilibrium ownership of an international oligopoly," Journal of International Economics, Elsevier, vol. 53(2), pages 307-333, April.
    12. Petri Lehto & Mihkel M. Tombak, 1997. "Consolidations and the Sequence of Acquisitions to Monopoly," CIG Working Papers FS IV 97-22, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    13. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-227, March.
    14. Medvedev, A., 2004. "Structural Remedies in Merger Regulation in a Cournot Framework," Discussion Paper 2004-006, Tilburg University, Tilburg Law and Economic Center.
    15. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
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    Citations

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    Cited by:

    1. Lars Sorgard & Andreea Cosnita-Langlais, 2013. "Enforcement vs Deterrence in Merger Control: Can Remedies Lead to Lower Welfare?," Post-Print hal-01668416, HAL.
    2. Dertwinkel-Kalt, Markus & Wey, Christian, 2016. "Structural remedies as a signaling device," Information Economics and Policy, Elsevier, vol. 35(C), pages 1-6.
    3. Weigt, H. & Willems, Bert, 2011. "The Effect of Divestitures in the German Electricity Market," Discussion Paper 2011-034, Tilburg University, Center for Economic Research.
    4. Patrice Bougette & Florent Venayre, 2008. "Contrôles a priori et a posteriori des concentrations : comment augmenter l'efficacité des politiques de concurrence," Revue d'économie industrielle, De Boeck Université, vol. 0(1), pages 9-40.
    5. Patrice Bougette, 2011. "Négociation d'engagements en matière de concentrations : une perspective d'économiste," Post-Print halshs-00580669, HAL.
    6. Thomas Giebe & Miyu Lee, 2015. "Competitors In Merger Control: Shall They Be Merely Heard Or Also Listened To?," SFB 649 Discussion Papers SFB649DP2015-011, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    7. Emilie Dargaud, 2013. "Horizontal mergers, efficiency gains and remedies," European Journal of Law and Economics, Springer, vol. 36(2), pages 349-372, October.
    8. repec:kap:ejlwec:v:44:y:2017:i:1:d:10.1007_s10657-014-9459-7 is not listed on IDEAS
    9. Mariana Cunha & Paula Sarmento & Hélder Vasconcelos, 2014. "Uncertain Efficiency Gains and Merger Policy," FEP Working Papers 527, Universidade do Porto, Faculdade de Economia do Porto.
    10. Cosnita-Langlais, Andreea & Tropeano, Jean-Philippe, 2012. "Do remedies affect the efficiency defense? An optimal merger-control analysis," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 58-66.
    11. Cosnita, Andreea & Tropeano, Jean-Philippe, 2009. "Negotiating remedies: Revealing the merger efficiency gains," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 188-196, March.
    12. Dertwinkel-Kalt, Markus & Wey, Christian, 2014. "Remedies vs. Extreme Options in Merger Control," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100397, Verein für Socialpolitik / German Economic Association.
    13. Cristina Pardo-Garcia & Jose Sempere-Monerris, 2015. "Equilibrium mergers in a composite good industry with efficiencies," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 6(1), pages 101-127, March.
    14. Dertwinkel-Kalt, Markus & Wey, Christian, 2012. "The effects of remedies on merger activity in oligopoly," DICE Discussion Papers 81, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    15. Dertwinkel-Kalt, Markus & Wey, Christian, 2016. "Evidence production in merger control: The role of remedies," DICE Discussion Papers 217, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    16. Helder Vasconcelos, 2013. "Can the failing firm defence rule be counterproductive?," Oxford Economic Papers, Oxford University Press, vol. 65(2), pages 567-593, April.
    17. Markus Dertwinkel-Kalt & Christian Wey, 2016. "Merger Remedies in Oligopoly under a Consumer Welfare Standard," Journal of Law, Economics, and Organization, Oxford University Press, vol. 32(1), pages 150-179.
    18. Cosnita-Langlais, Andreea & Tropeano, Jean-Philippe, 2012. "Do remedies affect the efficiency defense? An optimal merger-control analysis," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 58-66.
    19. Christian Steiner & Kai Hüschelrath & Jürgen Weigand, 2011. "Merger remedies involving restructuring costs in a Cournot framework," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 38(3), pages 417-434, July.
    20. repec:spr:annopr:v:238:y:2016:i:1:d:10.1007_s10479-015-2099-7 is not listed on IDEAS

    More about this item

    Keywords

    efficiency gains; endogenous mergers; failing firm defence.; merger remedies;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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