An Empirical Analysis of the European Commission's Horizontal Merger Decisions Based on the Complete Public Record

Abstract

I conduct an empirical analysis of the European Commission’s merger decision process that builds on previous work and extends it along three dimensions. First, I use a dataset consisting of the complete public record on merger decisions, rather than a sample of them. Second, I refine the measurement of market shares and Herfindahl–Hirschman Indexes to be included in binary choice models; these measures are based on based public information which often takes the form of ranges because of business secrecy concerns. Third, I use both parametric heteroskedastic methods and semiparametric methods to investigate the correlation between horizontal mergers decisions on one hand, and concentration measures and other explanatory variables on the other. The results show that, in addition to higher concentration being associated with a higher probability that the merger raises concerns (as previous studies found too), the Commission’s decision rule was, on average, tougher during Mr. Monti’s tenure, and when the transaction involved a final product market (rather than an intermediate product), or a national market. Instead, mergers involving US-based firms faced, on average, a more lenient standard.