Do remedies affect the efficiency defense? An optimal merger-control analysis

This paper deals with the enforcement of merger policy, and aims to study how merger remedies a¤ect the deterrence accomplished by controlling mergers. We determine the optimal frequency of investigations launched by the agency, and identify situations where the introduction of remedies can lead to a lower welfare. We …nd that the potential for remedies can make it less likely that the worst mergers are deterred. Even if the worst mergers are deterred, the potential for remedies can lead to more mergers with a negative impact to be proposed, and eventually to more decision errors by the antitrust authorities.JEL classi…cation: K21, L41

Section: Enforcement and Deterrence E¤ectsmentioning

confidence: 98%

Section: Comparing the Optimal Activity Levels Assuming Equal Deterrementioning

confidence: 99%

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Enforcement vs Deterrence in Merger Control: Can Remedies Lead to Lower Welfare?

Cosnita‐Langlais

Sørgard

2014

“…Vasconcelos (2010) notes the possibility of an over-…xing problem in which case the agency uses the remedial divestitures to optimally restructure the industry which may deter desirable merger proposals in the …rst place. 6 Closely related to our paper is Cosnita-Langlais and Tropeano (2012). They also assume that the merger's e¢ ciency level is private information.…”

Section: Related Literaturementioning

confidence: 99%

Remedies vs. Extreme Options in Merger Control

Dertwinkel-Kalt

Wey

2014

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractWe investigate how remedies in merger control a¤ect information acquisition by an antitrust agency. We identify conditions under which an "extreme options" regime which does not allow for remedies improves information acquisition by the agency which increases consumer surplus. The legislator ("principal") and the agency share the same objective function with the only exception that the latter must bear information costs. When remedies are not feasible, then the agency's incentive to acquire information is relatively large as a false decision tends to have large adverse e¤ects. When remedies are feasible, the intermediate option does not involve such risks, so that incentives to acquire information decreases. However, our results depend crucially on the institutional environment. In the case of an adversial system, information acquisition incentives are not per se lower if remedies are feasible.We thank Lars Sorgard and Deszö Szalay for their helpful comments.

“…The model that we present in the following builds on two models that have been proposed in the literature: Cosnita-Langlais andTropeano (2012), andSzalay (2005). First, our merger model follows the reduced-form model proposed by Cosnita-Langlais and Tropeano (2012), whereby different merger types can be uniquely characterized by an efficiency parameter.…”

Section: The Modelmentioning

confidence: 99%

Evidence Production in Merger Control: The Role of Remedies

Dertwinkel-Kalt

Wey

2021

We analyze evidence production in merger control as a delegation problem in an inquisitorial competition policy system. The antitrust agency's incentives to produce evidence on the efficiency of a merger proposal depend critically on its action set. Allowing for a compromising remedy solution reduces information acquisition incentives, and could therefore reduce consumer welfare. The effort-frustrating effect of the remedy solution can be eliminated if a remedy solution can be implemented only after evidence on the efficiency of a merger proposal has been produced. Keywords Merger remedies • Merger control • Antitrust JEL Classification L13 • L40 • K21"Overall [...] remedies have been used too often, too widely, too optimistically, and perhaps even strategically to the extent that they represent methods of avoiding challenging mergers but wishing to appear to be taking some action. This overuse of remedies [...] must be reversed in order to reverse the unfortunate evolution of merger policy into remedy policy. " -John Kwoka (2020: 99-100) For helpful comments and suggestions we thank the editor, Lawrence J. White, two anonymous referees, as well as Andreea Cosnita-Langlais, Catarina Marvao, Monika Schnitzer, Christoph Schottmüller, Lars Sorgard, Deszö Szalay, and audiences at the EEA (Geneva), IIOC (Philadelphia), CRESSE conference (Rhodes), EARIE conference (Milan), BECCLE conference (Bergen), Verein für Socialpolitik annual conference (Münster), Industrial Economics committee meeting (Berlin),