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

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  • Seldeslachts, Jo
  • Clougherty, Joseph A.
  • Barros, Pedro Pita

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.

Suggested Citation

  • Seldeslachts, Jo & Clougherty, Joseph A. & Barros, Pedro Pita, 2007. "Remedy for Now but Prohibit for Tomorrow: The Deterrence Effects of Merger Policy Tools," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 218, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Handle: RePEc:trf:wpaper:218
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    Cited by:

    1. 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.
    2. Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin B., 2011. "How effective is European merger control?," European Economic Review, Elsevier, vol. 55(7), pages 980-1006.
    3. 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).
    4. 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.
    5. 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.
    6. 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..
    7. 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.
    8. 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.
    9. Hüschelrath, Kai, 2009. "Methodologische Grundlagen einer Evaluation von Wettbewerbspolitik," ZEW Discussion Papers 09-084, ZEW - Leibniz Centre for European Economic Research.
    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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    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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