How Effective is European Merger Control?

WZB, Markets and Politics Working Paper No. SP II 2006-12

41 Pages Posted: 2 Aug 2006 Last revised: 16 May 2008

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

Date Written: April 3, 2008

Abstract

This paper applies a novel and intuitive approach based on stock market data to a unique dataset of large concentrations during the period 1990-2002 to assess the effectiveness of European merger control. We analyze the economic effects of the European Commission's merger control decisions and distinguish between prohibitions, clearances with commitments (either behavioral or structural), and outright clearances. We run an event study on merging and rival firms' stock prices to quantify the profitability effects of mergers and merger control decisions. The basic idea is to relate announcement and decision abnormal returns: merger control is effective if anticompetitive rents observed around the merger announcement are reversed by the antitrust decision, i.e. if there is a negative relation between announcement and decision abnormal returns. Our findings suggest that only outright prohibitions completely solve the competitive problems generated by the merger. Remedies are on average not effective in solving anticompetitive concerns, yet, we can qualify this finding. Remedies are more effective when they are applied during the first rather than the second investigation phase. Moreover, the European Commission appears to learn over time, since remedies are on average more effective in industries where they have been intensively applied before.

Keywords: Mergers, Merger Control, Remedies, European Commission, Event Studies, Ex-post Evaluation

JEL Classification: L4, K21, G34, C2, L2

Suggested Citation

Duso, Tomaso and Gugler, Klaus Peter and Yurtoglu, B. Burcin, How Effective is European Merger Control? (April 3, 2008). WZB, Markets and Politics Working Paper No. SP II 2006-12. Available at SSRN: https://ssrn.com/abstract=920605 or http://dx.doi.org/10.2139/ssrn.920605

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/

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