Merger Remedies at the European Commission: A Multinomial Logit Analysis

Abstract

This paper aims to build and empirically evaluate a discrete choice model of merger remedies as a basis for policy analysis. The database consists of 229 merger cases accepted in Phase I or Phase II of the European merger process between 1990 and 2005. We focus on the following question: Which merging firms' characteristics lead the European Commission to decide whether to require conditional acceptance? Although a lot of empirical studies have been carried out these last years, ours is distinguished by at least two original features. First, we explore determinanting factors of the Commission's decisions with a neural network model differentiating cases accepted with or without remedies (either structural or behavioral). Secondly, we implement three multinomial logit models. We find that variables related to high market power lead more frequently to a remedy outcome, whatever the phase. Innovative industries such as energy, transportation and communications positively affect the probability of a behavioral remedy. Lastly, former Competition Commissioner Mario Monti's policy appears to be pro-remedy, i.e. seeking concessions from merging parties.

Determinants of the Success of Remedy Offers: Evidence from European Community Mergers

“…43 As the world-wide turnover and the turnover of the merging companies are reported in the Commission's decision, it has been used in various empirical works in order to see its effect on various factors. For example Bougette, et al (2006) claims that mergers with larger worldwide turnover figures are more likely to divest some of their assets (as opposed to other types of remedies) as an attempt to remedy the anticompetitive effects of the merger. Although the effect of the annual turnover of the post-merger entity may have some interesting policy implications, one has to be very careful in interpreting these results.…”

“…For the purposes of this paper, probably the most relevant theoretical articles are Chopard, et al (2008) and Lyons and Medvedev (2007). The Chopard et al paper proposes a theoretical framework to assess the probability of a successful remedy settlement between the competition authority and the 4 For example Bougette, et al (2006) analyse the determinants of the choice of merger remedy, Davies, et al (2008) investigate the effect of EC merger remedies in collective dominance cases, Duso, et al (2006) use an event study methodology to identify if a merger was potentially anticompetitive and then look at what remedy was applied, and Seldeslachts, et al (2007) investigate the deterrence effect of merger remedies. merging parties.…”

The Determinants of Merger Litigation Strategies: An Empirical Analysis of EC Mergers

“…The case number was used to measure experience for example by GL.36 Although other papers such asBougette and Turolla (2006),Bergman et al (2007), or LG use pre-, and post-market shares as a measure of horizontal e¤ects, that would require a market-based and not merger-based analysis. It is often not identi…able which markets the e¢ ciency claims, and pre-merger e¢ ciency expectations relate to, therefore the analysis was merger-level and not market-level.…”