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An Empirical Assessment of the 2004 EU Merger Policy Reform

Author

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  • Tomaso Duso
  • Klaus Gugler
  • Florian Szücs
Abstract
Based on a database of 326 merger cases scrutinized by the European Commission between 1990 and 2007, we evaluate the economic impact of the change in Euro-pean merger legislation in 2004. We first propose a general framework to assess merger policy effectiveness, which is based on standard oligopoly theory and makes use of stock market reactions as an external assessment of the merger and the merger control decisions. We then focus on four different dimensions of effec-tiveness: 1) legal certainty; 2) frequency and determinants of type I and type II er-rors; 3) rent-reversion achieved by different merger policy tools; and 4) deterrence of anti-competitive mergers. To infer the economic impact of the merger policy reform, we compare the results of our four tests before and after its introduction. Our results suggest that the policy reform seems to have been only a modest im-provement of European merger policy. ZUSAMMENFASSUNG - Eine empirische Bewertung der in 2004 eingeführten Reform der Europäischen Fusionskontrolle - Basierend auf einer Stichprobe von 326 Fusionsfällen, welche der Europäischen Kommission zwischen Januar 1990 und Dezember 2007 vorlagen, wird in diesem Beitrag die Wirkung der in Mai 2004 eingeführten neuen Regulierung für Firmenfusionen erforscht. Zuerst wird ein allgemeiner Ansatz vorgeschlagen, um die Effektivität der Fusionskontrolle zu evaluieren, welcher auf der Oligopoltheorie beruht und Fusionen und Fusionskontrollentscheidungen anhand der Reaktionen von Aktienmärkten bewertet. Vier unterschiedliche Aspekte der Effektivität der Fusionskontrolle werden dann untersucht: 1) die Rechtssicherheit, 2) die Häufigkeit und Determinanten von Entscheidungsfehlern erster und zweier Ordnung seitens der Kommission, 3) die effektive Reduzierung der wettbewerbswidrigen Wirkungen von Fusionen, erzielt von unterschiedlichen wettbewerbspolitischen Instrumenten und 4) die Abschreckung von wettbewerbsschädigenden Fusionen. Um die Wirking der neuen Regulierung ab
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Tomaso Duso & Klaus Gugler & Florian Szücs, 2013. "An Empirical Assessment of the 2004 EU Merger Policy Reform," Economic Journal, Royal Economic Society, vol. 123(11), pages 596-619, November.
    • Handle: RePEc:ecj:econjl:v:123:y:2013:i:11:p:f596-f619
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    2. Carletti, Elena & Ongena, Steven & Siedlarek, Jan-Peter & Spagnolo, Giancarlo, 2015. "The Impact of Merger Legislation on Bank Mergers," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 530, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    3. Gugler, Klaus & Szücs, Florian, 2016. "Merger externalities in oligopolistic markets," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 230-254.
    4. Duso, Tomaso & Seldeslachts, Jo & Szucs, Florian, 2019. "The Impact of Competition Policy Enforcement on the Functioning of EU Energy Markets," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 40(01), pages 97-120.
    5. Andreea Cosnita-Langlais, 2016. "Enforcement of Merger Control. Theoretical Insights for Its Procedural Design," Revue économique, Presses de Sciences-Po, vol. 67(HS1), pages 39-51.
    6. Dissanaike, Gishan & Drobetz, Wolfgang & Momtaz, Paul P., 2020. "Competition Policy and the Profitability of Corporate Acquisitions," Journal of Corporate Finance, Elsevier, vol. 62(C).
    7. Budzinski, Oliver, 2012. "Impact evaluation of merger control decisions," Ilmenau Economics Discussion Papers 75, Ilmenau University of Technology, Institute of Economics.
    8. Joseph A. Clougherty & Tomaso Duso & Miyu Lee & Jo Seldeslachts, 2016. "Effective European Antitrust: Does Ec Merger Policy Generate Deterrence?," Economic Inquiry, Western Economic Association International, vol. 54(4), pages 1884-1903, October.
    9. Oliver Budzinski, 2011. "Impact Evaluation of Merger Decisions," Working Papers 112/11, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    10. Ralph B. Siebert, 2019. "Estimating Differential Dynamic Merger Effects on Market Structure and Entry in Related Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(3), pages 431-458, November.
    11. Ghosal Vivek, 2011. "The Law and Economics of Enhancing Cartel Enforcement: Using Information From Non-Cartel Investigations to Prosecute Cartels," Review of Law & Economics, De Gruyter, vol. 7(2), pages 501-538, December.
    12. Federico Mini, 2018. "Fifty is the New Forty: EU Merger Policy Permits Higher Market Shares After the 2004 Reform," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(3), pages 535-561, November.
    13. Joseph Clougherty & Tomaso Duso, 2015. "Correcting for Self-Selection Based Endogeneity in Management Research: A Review and Empirical Demonstration," Discussion Papers of DIW Berlin 1465, DIW Berlin, German Institute for Economic Research.
    14. Sven Heim & Kai Hüschelrath & Ulrich Laitenberger, 2016. "The Duration of the EC Merger Control Process: Determinants and the Impact of the 2004 Merger Regulation Reform," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 23(1), pages 37-62, February.
    15. Carletti, Elena & Ongena, Steven & Siedlarek, Jan-Peter & Spagnolo, Giancarlo, 2021. "The impacts of stricter merger legislation on bank mergers and acquisitions: Too-Big-To-Fail and competition," Journal of Financial Intermediation, Elsevier, vol. 46(C).
    16. Cosnita-Langlais Andreea & Sørgard Lars, 2018. "Enforcement and Deterrence in Merger Control: The Case of Merger Remedies," Review of Law & Economics, De Gruyter, vol. 14(3), pages 1-22, November.
    17. Affeldt, Pauline & Duso, Tomaso & Szücs, Florian, 2021. "25 years of European merger control," International Journal of Industrial Organization, Elsevier, vol. 76(C).
    18. Sang Jun Cho & Chune Young Chung & Daniel Sungyeon Kim, 2023. "Do antitrust laws erode shareholder returns? Evidence from the Chinese market," European Journal of Law and Economics, Springer, vol. 55(2), pages 349-376, April.
    19. Jing Yan, 2018. "Do Merger Laws Deter Cross‐Border Mergers and Acquisitions?," Australian Economic Papers, Wiley Blackwell, vol. 57(3), pages 376-393, September.
    20. Bernhardt, Lea, 2020. "Common factors of withdrawn and prohibited mergers in the European Union," Working Paper 184/2020, Helmut Schmidt University, Hamburg.
    21. Ralph Siebert, 2016. "The Impact of Horizontal Mergers on Market Structure: Evidence from the Semiconductor Industry," CESifo Working Paper Series 5911, CESifo.
    22. Markus Dertwinkel-Kalt & Christian Wey, 2021. "Evidence Production in Merger Control: The Role of Remedies," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 59(1), pages 1-12, August.
    23. Linde, Sebastian & Siebert, Ralph B., 2023. "Exploring the incremental merger value from multimarket and technology arguments," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    24. Ormosi, Peter L., 2012. "Tactical dilatory practice in litigation: Evidence from EC merger proceedings," International Review of Law and Economics, Elsevier, vol. 32(4), pages 370-377.
    25. Elena Chernova & Svetlana Razmanova, 2018. "Development of Competitive Environment in the Oil Market of Russian Federation: Empirical Analysis," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(2), pages 547-561.

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    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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