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How Effective is European Merger Control?

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  • Duso, Tomaso
  • Gugler, Klaus
  • Yurtoglu, Burcin B.

Abstract

This paper applies a novel methodology to a unique dataset of large concentrations during the period 1990-2002 to assess merger control’s effectiveness. By using data gathered from several sources and employing different evaluation techniques, we analyze the economic effects of the European Commission’s (EC) merger control decisions and distinguish between blockings, clearances with commitments (either behavioral or structural), and outright clearances. We run an event study on merging and rival firms’ stocks to quantify the profitability effects of mergers and merger control decisions. We back up our results and methodology by using alternative measures for the merger’s profitability effects based on balance sheet data and obtain consistent results. Our findings suggest that outright blockings solve the competitive problems generated by the merger. Remedies are not always effective in solving the market power concerns, at least not on average. Nevertheless, both structural (divestitures) and behavioral remedies do help restore effective competition when correctly applied to anticompetitive mergers during the first investigation phase. Yet, they are on the whole ineffective or even detrimental when applied after the second investigation phase. Finally, remedies - especially behavioral ones - seem to constitute a rent transfer from merging firms to rivals when mistakenly applied to pro-competitive mergers.

Suggested Citation

  • Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin B., 2006. "How Effective is European Merger Control?," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 153, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  • Handle: RePEc:trf:wpaper:153
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    References listed on IDEAS

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    More about this item

    Keywords

    Mergers; Merger Control; Remedies; European Commission; Event Studies; Expost Evaluation;

    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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