IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

On the Desirability of an Efficiency Defense in Merger Control

  • Johan Lagerlöf
  • Paul Heidhues

We develop a model in which two firms that have proposed to merge are privately informed about merger-specific efficiencies. This enables the firms to influence the merger control procedure by strategically revealing their information to an antitrust authority. Although the information improves upon the quality of the authority's decision, the influence activities may be detrimental to welfare if information processing/gathering is excessively costly. Whether this is the case depends on the merger control institution and, in particular, whether it involves an efficiency defense. We derive the optimal institution and provide conditions under which an efficiency defense is desirable. We also discuss the implications for antitrust policy and outline a three-step procedure that take the influence activities into consideration. ZUSAMMENFASSUNG - (Wann ist eine Effizienzverteidigung in der Fusionskontrolle wünschenswert?) Eine Effizienzverteidigung in der Fusionskontrolle besagt, dass wettbewerbsbeschränkende Fusionen dann erlaubt werden, wenn hinreichend große Synergieeffekte zu erwarten sind. Mögliche Synergieeffekte einer Fusion sind jedoch hauptsächlich den fusionierenden Unternehmen bekannt. Eine Effizienzverteidigung ermöglicht es den fusionierenden Unternehmen, die Entscheidung der Wettbewerbsbehörde zu beeinflussen, indem sie der Wettbewerbsbehörde ihre Informationen strategisch weitergeben (oder zurückhalten). Die Autoren untersuchen, ob und wann eine Effizienzverteidigung aus gesellschaftlicher Sicht wünschenswert ist. Hierzu entwickeln sie ein Model, in dem Unternehmen, die fusionieren möchten, private Informationen über die Synergieeffekte der Fusion besitzen. Die Unternehmen können die Entscheidung der Wettbewerbsbehörde beeinflussen, indem sie ihre Informationen strategisch an die Wettbewerbsbehörde weiterleiten. Obwohl die Informationen über Synergien die Entscheidung der Wettbewerbsbehörde verbessern, kann die Einflussnahme der Firmen die Wohlfahrt verringern, falls die Firmen zu viel in das Sammeln und Verarbeiten dieser Informationen investieren. Ob dies der Fall ist, hängt von der Ausgestaltung der Fusionskontrolle ab und insbesondere davon, ob die Fusionskontrolle eine Effizienzverteidigung zulässt. In dem theoretischen Model wird die optimale Fusionskontrollinstitution hergeleitet und Bedingungen herausgearbeitet unter denen eine Effizienzverteidigung wünschenswert ist. Die Autoren erörtern die Implikationen des Modells für die Fusionspolitik und entwickeln ein Drei-Stufen-Verfahren für Fusionsentscheidungen, welches die Einflussaktivitäten der Unternehmen berücksichtigt.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 02-08.

in new window

Length: 41 pages
Date of creation: May 2002
Date of revision:
Publication status: Published in the International Journal of Industrial Organization , Vol. 23(9-10), 2005, pp. 803-827.
Handle: RePEc:wzb:wzebiv:fsiv02-08
Contact details of provider: Postal: Reichpietschufer 50, 10785 Berlin, Germany
Phone: (++49)(30) 25491-441
Fax: (++49)(30) 25491-442
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. 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).
  2. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Scholarly Articles 4554125, Harvard University Department of Economics.
  3. Fabienne Ilzkovitz & Roderick Meiklejohn, 2003. "European Merger Control: Do We Need an Efficiency Defence?," Journal of Industry, Competition and Trade, Springer, vol. 3(1), pages 57-85, March.
  4. Lagerlof, Johan, 1997. "Lobbying, information, and private and social welfare," European Journal of Political Economy, Elsevier, vol. 13(3), pages 615-637, September.
  5. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
  6. Joseph Farrell & Carl Shapiro, 2001. "Scale Economies and Synergies in Horizontal Merger Analysis," Industrial Organization 0012002, EconWPA, revised 05 Jan 2001.
  7. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-26, March.
  8. Daughety, Andrew F & Reinganum, Jennifer F, 2000. "On the Economics of Trials: Adversarial Process, Evidence, and Equilibrium Bias," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(2), pages 365-94, October.
  9. Andrei Medvedev, 2004. "Efficiency Defense and Administrative Fuzziness in Merger Regulation," CERGE-EI Working Papers wp234, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  10. Tullock, Gordon, 1975. "On the Efficient Organization of Trials," Kyklos, Wiley Blackwell, vol. 28(4), pages 745-62.
  11. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, June.
  12. 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.
  13. Lewis, Tracy R & Poitevin, Michel, 1997. "Disclosure of Information in Regulatory Proceedings," Journal of Law, Economics and Organization, Oxford University Press, vol. 13(1), pages 50-73, April.
  14. Steven Shavell, 1994. "Acquisition and Disclosure of Information Prior to Sale," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 20-36, Spring.
  15. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
  16. Song Shin, H, 1996. "Adversarial and Inquisitorial Procedures in Arbitration," Economics Papers 124, Economics Group, Nuffield College, University of Oxford.
  17. Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter.
  18. Froeb, Luke M. & Kobayashi, Bruce H., 2001. "Evidence production in adversarial vs. inquisitorial regimes," Economics Letters, Elsevier, vol. 70(2), pages 267-272, February.
  19. Spector, David, 2002. "Horizontal mergers, entry, and efficiency defences," CEPREMAP Working Papers (Couverture Orange) 0206, CEPREMAP.
  20. Besanko, David & Spulber, Daniel F, 1993. "Contested Mergers and Equilibrium Antitrust Policy," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(1), pages 1-29, April.
  21. Patrick Legros & Andrew Newman, 2000. "Interference, Contracts and Authority with Insecure Communication," Econometric Society World Congress 2000 Contributed Papers 0650, Econometric Society.
  22. Fisher, Franklin M, 1987. "Horizontal Mergers: Triage and Treatment," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 23-40, Fall.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wzb:wzebiv:fsiv02-08. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jennifer Rontganger)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.