Dynamic Efficiency Considerations in EC Merger Control: An Intractable Subject or a Promising Chance for Innovation?
University of Oxford, Centre for Competition Law and Policy Working Paper No. L-09/06
100 Pages Posted: 22 Jun 2006
Date Written: June 19, 2006
Dynamic efficiencies theoretically bear greater potential than static efficiencies. Yet, their role in merger control is limited, not least due to difficulties in their practical implementation. At the same time, the new EC Merger Control Regulation (ECMR) and the Commission's Horizontal Merger Guidelines explicitly acknowledge dynamic efficiencies as a cognizable type of merger-related benefits.
This paper aims to contribute to the analysis of two questions: (i) do the new Guidelines represent a workable analytic framework for the evaluation of dynamic efficiency claims and is there room for dynamic efficiencies in the current merger control regime, and (ii) what are the main problems in practice, and what would adequately improve the current framework of efficiency analysis?
In its first part, this paper provides an introduction to the economic implications of the analysis of merger-related efficiencies. The second part analyses the role of dynamic efficiencies under the new merger control regime, focusing on the requirements stipulated in the ECMR and the Guidelines. Part three analyses crucial problems and according benchmarks which have to be considered when discussing proposals to refine dynamic efficiency analysis. It identifies four crucial problems: (i) insufficient information about potential efficiencies, (ii) existent information asymmetrically distributed between the Commission and the parties, (iii) a lack of legal certainty and business predictability for the firms and (iv) potential detrimental cost effects of the respective approach to efficiency analysis.
Part five discusses various suggestions for reform of the procedural approach to efficiency analysis. Finally, the paper suggests the introduction of an ex post audit regarding merger-related efficiencies. It constructs a four-stage decision framework within which the ex post audit aims to - in the long term - provide both merging parties and the Commission with more solid information about the potential of mergers to create (dynamic) efficiencies and the particulars of such benefits.
Keywords: merger control, efficiencies, efficiency, dynamic efficiency, ECMR, horizontal merger guidelines
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