How Effective is European Merger Control?

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, remediesespecially behavioral ones -seem to constitute a rent transfer from merging firms to rivals when mistakenly applied to pro-competitive mergers.

Bondholders’ wealth effects in domestic and cross-border bank mergers

“…This finding confirms our conjecture, based on Duso et al (2008), that anti-trust actions capture the presence of possible changes in market power and the difficulties often present in adequately dealing with it.…”

“…We therefore rely on the market knowledge of the anti-trust authority to determine whether or not a merger increases market power. Important for our purposes are also the findings by Duso et al (2008). They show that though investors can predict fairly accurately the European anti-trust investigations and actions, barring merger blocks, European anti-trust actions often fail to remove all market power acquired through the merger.…”

Quis Custodiet Ipsos Custodes? or Measuring and Evaluating the Effectiveness of Competition Enforcement

“…Fridolfsson and Stennek (2006) review the literature and conclude that rivals do not tend to benefit, suggesting that mergers on average increase efficiency. Duso et al (2006), however, come to a somewhat different conclusion after reviewing the literature. According to them, most studies tend to find that rivals do benefit from horizontal mergers, but the authors of these studies draw different conclusions from their findings.…”

The Effect of EU Antitrust Investigations and Fines on a Firm's Valuation

“…[] and Duso et al . [] for empirical analyses of the effects of EU merger notifications and decisions. They also make use of the event study methodology.…”