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Remedy for Now but Prohibit for Tomorrow: The Deterrence Effects of Merger Policy Tools

Author

Listed:
  • Jo Seldeslachts
  • Joseph A. Clougherty
  • Pedro Pita Barros
Abstract
Antitrust policy involves not just the regulation of anti-competitive behavior, but also an important deterrence effect. Neither scholars nor policymakers have fully researched the deterrence effects of merger policy tools, as they have been unable to empirically measure these effects. We consider the ability of different antitrust actions - Prohibitions, Remedies, and Monitorings - to deter firms from engaging in mergers. We employ cross-jurisdiction/pan-time data on merger policy to empirically estimate the impact of antitrust actions on future merger frequencies. We find merger prohibitions to lead to decreased merger notifications in subsequent periods, and remedies to weakly increase future merger notifications: in other words, prohibitions involve a deterrence effect but remedies do not. ZUSAMMENFASSUNG - (Auflagen heute, Untersagung morgen: Abschreckungswirkung von Wettbewerbs-intrumenten) Wettbewerbspolitik ist nicht nur Regulierung von wettbewerbsfeindlichem Verhalten, sondern hat auch eine wesentliche Abschreckungswirkung. Weder Wissenschaftler noch politische Entscheidungsträger haben die Abschreckungswirkung von Wettbewerbspolitik vollständig untersucht, da es sehr schwierig ist diese Wirkung empirisch nachzuweisen. Wir untersuchen die Wirkung verschiedener wettbewerbspolitischer Maßnahmen - Untersagung, Auflagen und Monitoring - um Unternehmen von Zusammenschlüssen abzuhalten. Wir nutzen einen Panel-Datensatz, um den Einfluss von Wettbewerbspolitik auf die künftige Anzahl von Firmenzusammenschlüssen zu bewerten. Wir zeigen, dass die Untersagung von Zusammenschlüssen die Fusionsankündigung in der Zukunft reduziert, und dass Fusionsauflagen künftige Ankündigungen schwach ansteigen lassen. Anders gesagt: Untersagungen haben eine führen zu Abschreckungswirkung, Auflagen nicht.

Suggested Citation

  • Jo Seldeslachts & Joseph A. Clougherty & Pedro Pita Barros, 2007. "Remedy for Now but Prohibit for Tomorrow: The Deterrence Effects of Merger Policy Tools," CIG Working Papers SP II 2007-02, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    • Handle: RePEc:wzb:wzebiv:spii2007-02
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    Cited by:

    1. Andreea Cosnita & Jean-Philippe Tropeano, 2006. "On the effective design of the efficiency defence," Cahiers de la Maison des Sciences Economiques v06030, Université Panthéon-Sorbonne (Paris 1).
    2. Jan Loecker & Jozef Konings & Patrick Cayseele, 2008. "Merger Review: How Much of Industry is Affected in an International Perspective?," Journal of Industry, Competition and Trade, Springer, vol. 8(1), pages 1-19, March.
    3. Peter L. Ormosi, 2009. "Determinants of the success of remedy offers: Evidence from European Community mergers," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2009-11, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    4. Cosnita, Andreea & Tropeano, Jean-Philippe, 2009. "Negotiating remedies: Revealing the merger efficiency gains," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 188-196, March.
    5. Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin B., 2011. "How effective is European merger control?," European Economic Review, Elsevier, vol. 55(7), pages 980-1006.
    6. Pedro Barros & Joseph Clougherty & Jo Seldeslachts, 2010. "How to Measure the Deterrence Effects of Merger Policy: Frequency or Composition?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 17(1), pages 1-8.
    7. Jo Seldeslachts & Joseph A. Clougherty & Pedro Pita Barros, 2009. "Settle for Now but Block for Tomorrow: The Deterrence Effects of Merger Policy Tools," Journal of Law and Economics, University of Chicago Press, vol. 52(3), pages 607-634, August.
    8. Hüschelrath, Kai, 2009. "Methodologische Grundlagen einer Evaluation von Wettbewerbspolitik," ZEW Discussion Papers 09-084, ZEW - Leibniz Centre for European Economic Research.
    9. Oliver Budzinski, 2009. "Modern Industrial Economics and Competition Policy: Open Problems and Possible Limits," Working Papers 93/09, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    10. Fumagalli, Eileen & Nilssen, Tore, 2008. "Waiting to Merge," Memorandum 13/2008, Oslo University, Department of Economics.
    11. Cosnita-Langlais, Andreea & Tropeano, Jean-Philippe, 2012. "Do remedies affect the efficiency defense? An optimal merger-control analysis," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 58-66.
    12. Oliver Budzinski, 2010. "An Institutional Analysis of the Enforcement Problems in Merger Control," Working Papers 101/10, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.

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    More about this item

    Keywords

    merger policy tools; deterrence effects; cross-section/time-series data;
    All these keywords.

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L49 - Industrial Organization - - Antitrust Issues and Policies - - - Other
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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