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An Institutional Analysis of the Enforcement Problems in Merger Control

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  • Oliver Budzinski

    () (Department of Environmental and Business Economics, University of Southern Denmark)

Abstract

The literature identifies a significant drop in merger control enforcement activity on both sides of the Atlantic during the last decade. Furthermore, this drop in enforcement activity is convincingly connected to enforcement problems on the sides of the competition agencies. This paper goes beyond the identification of under-enforcement and proceeds to the analysis of causes for the enforcement problems and the discussion of possible solutions. It argues that modern institutional economics suggest that a lack of ‘fit’ between the ‘new’ economic approach to merger control and the ‘old’ institutional environment of the legal enforcement procedures explains the drop of enforcement effectiveness on both sides of the Atlantic by implicitly raising the standard of proof, leading to unattainable standards, virtually eroding merger control enforcement power. As a consequence, the effects-based approach to merger control fails due to its failure to acknowledge its institutional implications. Reconciling industrial and institutional economics – promoting a comprehensive competition economics approach – however offers avenues towards an effective use of sophisticated industrial economic theories and methods. Firstly, incorporating economics into enforceable rules like strong rebuttable presumptions would adjust substantive merger control policy to the procedural institutional environment. Secondly, a reform of the standards of proof provisions would adjust the procedural framework to the characteristics of modern economic evidence and concepts. In summary, the enforcement problems in merger control require even more economic thinking, complementing industrial economic thought with institutional economic thought. I like to thank Arndt Christiansen and Eva Roth as well as the participants of research seminars at the Kiel Institute for the World Economy and at the Düsseldorf Institute for Competition Economics (DICE) for valuable comments on earlier versions of this paper.

Suggested Citation

  • Oliver Budzinski, 2010. "An Institutional Analysis of the Enforcement Problems in Merger Control," Working Papers 101/10, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
  • Handle: RePEc:sdk:wpaper:101
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    File Function: First version, 2010-06
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    References listed on IDEAS

    as
    1. Oliver Budzinski & Gisela Aigner & Arndt Christiansen, 2006. "The Analysis of Coordinated Effects in EU Merger Control: Where do we stand after Sony/BMG and Impala?," Marburg Working Papers on Economics 200614, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. Oliver Budzinski, 2009. "An international multilevel competition policy system," International Economics and Economic Policy, Springer, vol. 6(4), pages 367-389, December.
    3. Arndt Christiansen and Wolfgang Kerber & Wolfgang Kerber, 2006. "Competition Policy with Optimally Differentiated Rules Instead of "Per se Rules vs. Rule of Reason"," Marburg Working Papers on Economics 200606, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    4. Oliver Budzinski, 2009. "Modern Industrial Economics and Competition Policy: Open Problems and Possible Limits," Working Papers 93/09, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    5. Seldeslachts, Jo & Clougherty, Joseph A. & Barros, Pedro Pita, 2007. "Remedy for Now but Prohibit for Tomorrow: The Deterrence Effects of Merger Policy Tools," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 218, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    6. repec:pri:cepsud:140weinberg is not listed on IDEAS
    7. Budzinski, Oliver & Christiansen, Arndt, 2007. "The Oracle/PeopleSoft case: unilateral effects, simulation models and econometrics in contemporary merger control," IBES Diskussionsbeiträge 157, University of Duisburg-Essen, Institute of Business and Economic Studie (IBES).
    8. Oliver Budzinski & Isabel Ruhmer, 2010. "Merger Simulation In Competition Policy: A Survey," Journal of Competition Law and Economics, Oxford University Press, vol. 6(2), pages 277-319.
    9. Damien J. Neven, 2006. "Competition economics and antitrust in Europe," Economic Policy, CEPR;CES;MSH, vol. 21(48), pages 741-791, October.
    10. Orley Ashenfelter & Daniel Hosken, 2008. "The Effect of Mergers on Consumer Prices: Evidence from Five Selected Case Studies," Working Papers 1037, Princeton University, Department of Economics, Center for Economic Policy Studies..
    11. Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin B., 2011. "How effective is European merger control?," European Economic Review, Elsevier, vol. 55(7), pages 980-1006.
    12. Tenn, Steven & Froeb, Luke & Tschantz, Steven, 2010. "Mergers when firms compete by choosing both price and promotion," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 695-707, November.
    13. Dennis W. Carlton, 2007. "Does Antitrust Need to be Modernized?," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 155-176, Summer.
    14. Oliver Budzinski, 2008. "Monoculture versus diversity in competition economics," Cambridge Journal of Economics, Oxford University Press, vol. 32(2), pages 295-324, March.
    15. Ronald H. Coase, 2000. "The new institutional economics," Chapters,in: Institutions, Contracts and Organizations, chapter 1 Edward Elgar Publishing.
    16. Justus Haucap, 2011. "Bounded Rationality and Competition Policy," Chapters,in: Competition Policy and the Economic Approach, chapter 11 Edward Elgar Publishing.
    17. Kamerbeek, S.P., 2009. "Merger Performance and Efficiencies in Horizontal Merger Policy in the US and the EU," MPRA Paper 18064, University Library of Munich, Germany.
    18. Damien Neven & Miguel Mano, 2009. "Economics at DG Competition, 2008–2009," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(4), pages 317-347, December.
    19. Damien Neven & Svend Albæk, 2007. "Economics at DG Competition 2006–2007," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 31(2), pages 139-153, September.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Bougette, Patrice & Budzinski, Oliver & Marty, Frédéric, 2017. "Exploitative abuse and abuse of economic dependence: What can we learn from the industrial organization approach?," Ilmenau Economics Discussion Papers 111, Ilmenau University of Technology, Institute of Economics.
    2. Budzinski, Oliver & Haji Ali Beigi, Maryam, 2013. "Competition policy agendas for industrializing countries," Ilmenau Economics Discussion Papers 81, Ilmenau University of Technology, Institute of Economics.
    3. Budzinski Oliver & Kuchinke Björn A., 2012. "Deal or No Deal? Consensual Arrangements as an Instrument of European Competition Policy," Review of Economics, De Gruyter, vol. 63(3), pages 265-292, December.
    4. repec:kap:ejlwec:v:44:y:2017:i:1:d:10.1007_s10657-014-9459-7 is not listed on IDEAS
    5. Budzinski, Oliver, 2012. "Impact evaluation of merger control decisions," Ilmenau Economics Discussion Papers 75, Ilmenau University of Technology, Institute of Economics.
    6. Oliver Budzinski, 2011. "Impact Evaluation of Merger Decisions," Working Papers 112/11, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    7. Oliver Budzinski, 2011. "The Institutional Framework for Doing Sports Business: Principles of EU Competition Policy in Sports Markets," Working Papers 108/11, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    8. Budzinski, Oliver & Eckert, Sandra, 2015. "Wettbewerb und Regulierung," Ilmenau Economics Discussion Papers 93, Ilmenau University of Technology, Institute of Economics.
    9. Budzinski, Oliver, 2012. "Würde eine unabhängige europäische Wettbewerbsbehörde eine bessere Wettbewerbspolitik machen?," Ilmenau Economics Discussion Papers 78, Ilmenau University of Technology, Institute of Economics.
    10. Budzinski, Oliver, 2012. "Empirische Ex-Post Evaluation von wettbewerbspolitischen Entscheidungen: Methodische Anmerkungen," Ilmenau Economics Discussion Papers 69, Ilmenau University of Technology, Institute of Economics.

    More about this item

    Keywords

    Merger control; European competition policy; antitrust; enforcement problems; in-stitutional economics; more economic approach; standard of proof;

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact

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