Compulsory or voluntary pre-merger notification? Theory and some evidence

Abstract

We compare the prevailing system of compulsory pre-merger notification with the Australian system of voluntary pre-merger notification. It is shown that, for a non-trivial set of parameter values, a perfect Bayesian equilibrium exists in mixed strategies in which the regulator investigates un-notified mergers with probability less than one and the parties choose notification with probability less than one.Thanks to the signaling opportunity that arises when notification is voluntary, voluntary notification leads to lower enforcement costs for the regulator and lower notification costs for the merging parties. Some of the theoretical predictions are supported by exploratory empirical tests using merger data from Australia. Overall, our results suggest that voluntary merger notification may achieve objectives similar to those achieved by compulsory systems at lower costs to the merging parties as well as to the regulator.

Merger selection, evidence provision, and the timing of merger control

“…19 In terms of related literature, few papers address the optimal timing of enforcing competition policy. Barros (2003) and Berges et al (2008) study the opportunity of mandatory notifications for the agreement exemptions under Art.101 TFEU, whereas Choe and Shekhar (2010) consider the same question, of compulsory ex ante notifications, but in the case of mergers. We, in contrast, focus on the role of evidence provision, both before and after merger consummation, whereas the existing papers ignore this point.…”

Optimal Pre-Merger Notification Mechanisms - Incentives And Efficiency Of Mandatory And Voluntary Schemes

“…This discretional advantage of the voluntary scheme seems relevant since competition agencies in the US and Europe spend important resources in reviewing mergers that although being above the notification threshold posses no competitive risk. 3 The second advantage of the voluntary system -already mentioned by Choe and Shekhar (2005) -relies on the fact that the Competition Agency (CA) acts after the firms have made a decision about notifying the authorities, which provides some information to the agency about the competitive risk of the merger. Since the CA moves in a second stage, the agency does not have to inspect all merger cases.…”