The Ambivalent Role of Punishment in Post-Merger Coordination and the New Approach of the 2010 US Horizontal Merger Guidelines (original) (raw)
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Antitrust policy involves not just the regulation of anti-competitive behavior, but also an important deterrence effect. Neither scholars nor policymakers have fully researched the deterrence effects of merger policy tools, as they have been unable to empirically measure these effects. We consider the ability of different antitrust actions-blocked-mergers, negotiated-settlements, and monitorings-to deter firms from engaging in mergers. We employ cross-jurisdiction/pan-time data on merger policy to empirically estimate the impact of antitrust actions on future merger frequencies. We find blocked-mergers to lead to decreased merger notifications in subsequent periods, and negotiated-settlements to weakly increase future merger notifications; in other words, blocked-mergers involve a deterrence effect but negotiated-settlements do not.
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This article will analyse the issue of the assessment of the likelihood of a merger in a cartelised market inducing or enhancing coordinated effects.Although there is decisional practice on the impact of past coor- dination on the assessment of a merger’s likelihood of inducing coordinated effects, such decisional guidance is very rare as regards the assessment of mergers in cartelised markets. Mergers in cartelised markets should be assessed on a case-by-case basis.A presumption of illegality for such mergers should be avoided. A case-by-case analysis focusing on the pre-merger and post-merger market structure as well as on the incentives for continuing the collusion in the post-merger market has significantly more merit. Mergers in cartelised industries are not the cause of the adverse impact on competition.What should be assessed is the harm of the merger itself in the already anticompetitive market. If the merger induces a significant impediment to the existing level of reduced competition, then the merger should not be cleared (at least not without remedies). The concept of “significant” assumes great importance in such circumstances, as the merger may lead to an impediment but such impediment is not always significant in a market where explicit collusion occurs.
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Merger enforcement today relies on settlements more than litigation to resolve anti-competitive concerns. The impact of settlement policy on welfare and the proper goals of settlement policy are highly controversial. Some argue that gun-shy agencies settle for too little while others argue that agencies use their power to delay to extract over-reaching settlement terms, even when mergers are not welfare-reducing. This article uses decision theory to throw light on this controversy. The goal of this article is to formulate and analyze agency merger enforcement and settlement commitment policies in the face of imperfect information, litigation costs, and delay risks by the merging parties, agencies, and the courts. The article explains why limiting the goal of merger enforcement and agency settlement policy simply to avoiding welfare harms (but no more) is flawed as a matter of both law and policy and would compromise deterrence. The decision-theoretic analysis distinguishes two types...
SSRN Electronic Journal, 2005
Forthcoming in 'Handbook of Research in TransAtlantic Antitrust' (Marsden, P (ed.)) Edward Elgar Publishing, 2006 I. Introduction. Cross border merger control has traditionally been a difficult subject for multinational cooperation, non-the less harmonisation. The multitude of interests at stake and the heterogeneous multinational environment mean that attempts to reduce inefficiencies stemming out of multi-jurisdictional merger review face resistance at various levels. This paper examines the domestic nature of merger control and how it affects the feasibility and effectiveness of cooperation and convergence in merger regulation. It explores the role of bilateral and multinational initiatives in merger control and identifies their limits. In doing so, the discussion echoes the challenges for undertakings and agencies operating in the current sub-optimal environment of multiple enforcers and the difficulty of resolving present inefficiencies.
Imperfect Information and the Choice Between Collusion and Horizontal Merger
Metroeconomica, 1990
If the payoff obtained by the parties of an agreement depends on the values set for variables the value of which cannot be described precisely or monitored accurately, then the first best outcome may not be achieved. It is shown here that in some cases a second best long term agreement gives the parties a higher payoff, in other cases a short term arrangement is preferred. The interpretation of this result given in the paper is that when a long term contract is preferable, then firms are unable to commit themselves to it through a collusive agreement, and they will try to merge. Vice versa, no need to integrate arises when the preferred second best agreement is the short term one. The last section provides an example, where advertisement effort is non-contractible, while prices are.
Introduction to the Mini-Symposium on New Directions in Research on Merger Policy Design
The Journal of Industrial Economics, 2010
IN RECENT YEARS THERE HAS BEEN A MARKED INCREASE IN INTEREST in the empirical evaluation of competition policy generally and merger policy more specifically. This greater interest in actual decision making in merger control proceedings has made researchers much more aware of many aspects of mergers that have not played a role in the classic theoretical treatments of the subject by Salant, Switzer and Reynolds [1983], Farrell and Shapiro [1990], and Kamien and Zang [1990]. Modern merger policy consists decreasingly in simple up or down decisions on the proposed merger as considered in this literature. Increasingly, policy intervention imposes remedies instead of outright prohibitions. Merger activity is further shaped by self-selection on the participating firms that believe their merger can pass scrutiny and generates sufficient benefits to brave the regulatory process. Increasingly, firms adjust the initial structuring of mergers and merger partners in order to satisfy anticipated regulatory concerns. In addition, we have seen instances in which merger decisions have taken into account anticipated future transactions, potential entry and other assessments of counterfactuals by the competition authorities. Furthermore, there have been lively discussions in recent years as to whether competition policy should be less lenient in macroeconomically difficult times. In light of these challenges we have seen in recent years a growing number of papers that attempt to shed light on merger policy design issues both from a theoretical and an empirical perspective. In this mini-symposium on merger policy design, we have brought together four excellent papers that we feel exemplify this trend in research. All of them were originally submitted in 2008 and accepted during 2009. The first two papers in the symposium are among the first contributions to extend well-known papers in the merger literature to address the issue of remedies. The second set of papers is included because they challenge us to rethink some issues in merger policy that we might have thought were settled. Understanding the role of remedies is a particularly important issue for practical merger policy. As Lyons [2009] has documented, remedied mergers have become increasingly important since 1990 at the European Commission. Requiring remedies has become by far the most frequent intervention among all merger control actions. The two papers on remedies included in this symposium are among the first studies to address this issue theoretically.
Merger Control Procedures and Institutions: A Comparison of the EU and US Practice
SSRN Electronic Journal, 2000
The objective of this paper is to discuss and compare the role that different constituencies play in US and EU procedures for merger control. We describe the main constituencies (both internal and external) involved in merger control in both jurisdictions and discuss how a typical merger case would be handled under these procedures. At each stage, we consider how the procedure unfolds, which parties are involved, and how they can affect the procedure. Our discussion reveals a very different ecology. EU and US procedures differ in terms of their basic design and in terms of the procedures that are naturally associated with these alternative designs. On the one hand, there is a single investigator and decision maker operating under a symmetric mandate in the EU and on the other hand, an investigation and settlement operating under the threat of a court decision in case of challenge only in the US. The EU has developed numerous procedures and has granted extensive rights to the parties in the context of these procedures in order to provide some guarantee that the Commission's role as investigator and decision maker at first instance is not abused. By contrast, the US procedures appear to be rather informal, the balance in the investigation and evaluation of the merger being provided by the credible threat of a court decision. With a strong federal government that has extensive competences for regulation, merger control on competition grounds is subject to the additional public interest test of regulators in the US. Such additional control is weak in the EU, which has more limited competences for regulation. In addition, both the executive and the legislative powers are more fully developed at the federal level in the US. Both the executive power and the legislative seem to be in position to wield greater influence on enforcement in the US than is the case in the EU. merger control is actually more centralised in the EU than the US, despite the fact that the EU institutional construction falls short of a full federal structure.