Duso, Tomaso and Gugler, Klaus and Yurtoglu, Burcin B.
How Effective is European Merger Control?
European Economic Review, 55 (7).
This paper applies an 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. The basic idea is to relate announcement and decision abnormal returns. Under a set of
four maintained assumptions, merger control might be interpreted to be effective if rents accruing
due to the increased market power 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. To clearly identify the events' competitive effects, we explicitly control for the market
expectation about the outcome of the merger control procedure and run several robustness checks
to assess the role of our maintained assumptions. We find that only outright prohibitions
completely reverse the rents measured around a merger's announcement. On average, remedies
seem to be only partially capable of reverting announcement abnormal returns. Yet they seem to be
more effective when applied during the first rather than the second investigation phase and in
subsamples where our assumptions are more likely to hold. Moreover, the European Commission
appears to learn over time. (authors' abstract)