Eliciting Information from Interested Parties in Merger Control (original) (raw)

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SSRN Electronic Journal, 2000

A merger requires at least one of two separate yet equally important sets of negotiations. The first set involves merging parties to discuss issues related to the terms of the merger, including target firm's valuation. The second set resolves disputes between the merging parties and the law enforcement agency over the potential anticompetitive impact of the merger. In this paper, we investigate the determinants of the probability of completing an acquisition deal conditional on government approval. We apply a nested logit model to a sample of completed and cancelled acquisitions that allows the completion decision to be made in two steps-obtaining the regulatory approval in the first stage and making decisions to complete or cancel the deal in the second stage. We find that merger parties' decision to complete or cancel a merger deal is not independent of the law enforcement agency's decision to challenge the deal. Firm as well as deal characteristics of challenged deals are systematically different from those of unchallenged deals. Our results support previous empirical findings that mergers that are expected to induce larger increase in market concentration are more likely to be challenged by the law enforcement agencies. Including target termination fees is significantly positively related to the probability of completion irrespective of whether the deal is challenged or not. However, we document that including target termination fees deters competitive bidding only if the deal was challenged and leads to higher bid premium to the target firm only if the deal was not challenged. Conditional on the merger not being challenged, acquirer's investment opportunities and the relative size of acquirer and target firms are significantly positively related to the probability of completion, while target investment opportunities and the existence of multiple bidders are significantly negatively related to the probability of completion.

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International Journal of Industrial Organization, 2010

We study a voluntary pre-merger notification game under asymmetric information and characterize perfect Bayesian equilibria. It is shown that the equilibrium outcomes are similar to those when notification is compulsory. However, 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 where pre-merger notification is voluntary. Overall, our results suggest that voluntary merger notification may achieve objectives similar to those achieved by compulsory systems at lower costs to the parties as well as to the regulator.

EFFICIENCY GAINS AND STRUCTURAL REMEDIES IN MERGER CONTROL*

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This paper studies the role of structural remedies in merger control in a Cournot setting where (endogenous) mergers are motivated by prospective efficiency gains. Every merger has to be submitted to an Antitrust Authority (AA) which, apart from blocking or unconditionally approving it, might approve a modified version of the concentration where divestitures are required. Some important merger policy implications can be drawn. First, when divestitures are required, the AA over-fixes, i.e., goes beyond the recreation of the level of competition that existed prior to the transaction. Second, by insisting in overfixing, the AA may discourage firms to look for more efficient mergers. Finally, structural remedies are shown to open up new merger opportunities to firms.

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SSRN Electronic Journal, 2000

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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.