Merger Remedies, Incomplete Information, and Commitment

Abstract

Current EU law states that the competition authorities, in dealing with a merger proposal, cannot commit to specific remedies when rejecting proposals and essentially have to resort to accept or reject remedies proposed to it. We show that giving the authorities the power to propose, and commit to, remedies for a merger that they cannot accept in full will lead to a more efficient merger policy. We do this by setting up a theoretic model where government lacks information about the various markets affected by the merger and has resources to collect information on some but not all of them. The benefit of being able to commit is that government, in some cases, is able to obtain remedies rather than full stop of a merger by collecting information on relatively benign markets and, in some other cases, is able to obtain remedies even without spending resources on collecting information.

Keywords: merger policy, merger remedies, commitment

JEL Classification: L40, G34