Competitors in Merger Control: Shall They Be Merely Heard or Also Listened To?
52 Pages Posted: 27 Feb 2015 Last revised: 16 Feb 2019
Date Written: February 14, 2019
There are legal grounds to hear competitors in merger control proceedings, and competitor involvement has gained significance. To what extent this is economically sensible is the focus of our game-theoretic analysis. The competition authority applies some welfare standard while the competitor cares about its own profit. In expectation, there is neither a pure conflict nor a complete alignment of interest. We distinguish hard and soft information and ask whether hearing the competitor might convey valuable but non-verifiable information to the authority. We find that the authority will mostly have to ignore the competitor's cheap talk but, depending on the authority's own prior information, strictly following the competitor's selfish recommendation can improve the authority's decision. Under a consumer welfare standard, non-verifiable information should be ignored. Complementary to our analysis, we provide empirical data of competitor involvement in EU merger cases and give an overview of the legal discussion in the EU and US.
Keywords: merger control, antitrust, European Commission, signaling, efficiency, competitors, rivals, game theory
JEL Classification: G34, K21, L4, C73, L2
Suggested Citation: Suggested Citation