Download this Paper Open PDF in Browser

EU Merger Remedies: A Preliminary Empirical Assessment

THE POLITICAL ECONOMY OF ANTITRUST, CONTRIBUTIONS TO ECONOMIC ANALYSIS, J. Stennek and V. Ghosal, eds., North Holland, 2006

58 Pages Posted: 8 Feb 2006  

Tomaso Duso

German Institute for Economic Research (DIW Berlin); Duesseldorf Institute for Competition Economics (DICE)

Klaus Peter Gugler

Vienna University of Economics and Business; European Corporate Governance Institute (ECGI)

B. Burcin Yurtoglu

WHU - Otto Beisheim School of Management

Abstract

Mergers that substantially lessen competition are challenged by antitrust authorities. Instead of blocking anticompetitive transitions straight away, authorities might choose to negotiate with the merging parties and allow the transactions to proceed with modifications that restore or preserve the competition in the involved markets. We study a sample of 167 mergers that were under the European Commission's scrutiny from 1990 to 2002. We use an event study methodology to identify the potential anticompetitive effects of mergers as well as the remedial provisions on these transactions. Stock market reactions around the day of the merger's announcement provide information on the first question, whereas the stock market reactions around the commission's final decision day convey information about the outcome of the bargaining process between the authority and the merging parties. We first classify mergers according to their effects on competition and then we develop hypotheses on the effects that remedies are supposed to achieve depending on the merger's competitive outcome. We isolate several stylized facts. First, we find that remedies were not always appropriately imposed. Second, the market seems to be able to predict remedies' effectiveness when applied in phase I. Third, the market also seems able to produce a good prior to phase II's clearances and prohibitions, but not to remedies. This can be due either to a measurement problem or related to the increased merging firms' bargaining power during the second phase of the merger review.

Keywords: Merger Control, Remedies, European Commission, Event Studies

JEL Classification: L4, K21, C12, C13

Suggested Citation

Duso, Tomaso and Gugler, Klaus Peter and Yurtoglu, B. Burcin, EU Merger Remedies: A Preliminary Empirical Assessment. THE POLITICAL ECONOMY OF ANTITRUST, CONTRIBUTIONS TO ECONOMIC ANALYSIS, J. Stennek and V. Ghosal, eds., North Holland, 2006. Available at SSRN: https://ssrn.com/abstract=825524

Tomaso Duso (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany
+49 211- 81 10235 (Phone)
+49 211- 81 15499 (Fax)

HOME PAGE: http://sites.google.com/site/tomasoduso/home

Klaus Gugler

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

HOME PAGE: http://www.wu.ac.at/iqv/mitarbeiter/gugler

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

B. Burcin Yurtoglu

WHU - Otto Beisheim School of Management ( email )

Chair of Corporate Finance
Burgplatz 2
Vallendar, 56179
Germany
+49 261 6509-721 (Phone)
+49 261 6509-729 (Fax)

HOME PAGE: http://www.whu.edu/forschung/fakultaet/finance-group/corporate-finance/

Paper statistics

Downloads
357
Rank
68,626
Abstract Views
1,601