Competitors in merger control: Shall they be merely heard or also listened to?

Thomas Giebe,Miyu Lee

doi:10.1007/s10657-020-09649-3

Abstract

There are legal grounds to hear competitors in merger control proceedings, and competitor involvement has gained significance. To what extent this is economically sensible is the focus of our game-theoretic analysis. The competition authority applies some welfare standard while the competitor cares about its own profit. In expectation, there is neither a pure conflict nor a complete alignment of interest. We distinguish hard and soft information and ask whether hearing the competitor might convey valuable but non-verifiable information to the authority. We identify a case where, based on the authority’s verifiable information, the authority’s decision is improved by following the competitor’s selfish but non-verifiable communication. We argue that the practical relevance of this constellation is very limited, especially so under a consumer welfare standard. Thus, non-verifiable information should mostly be ignored. Complementary to our analysis, we provide empirical data of competitor involvement in EU merger cases and give an overview of the legal discussion in the EU and US.

Highlights

Both in the European Union (EU) and the U.S, competitors have gained significance in merger control proceedings
EU merger law presently entitles competitors to submit their views on the notified merger in writing and in a formal hearing before the European Commission (Commission) makes a final decision
We document the growing significance and the legal discussion of competitor involvement in merger proceedings in the EU and the U.S This is complemented by empirical data of EU merger cases

Summary

Introduction

Both in the European Union (EU) and the U.S, competitors have gained significance in merger control proceedings. In the U.S, competitors’ claims were traditionally treated restrictively but both the Department of Justice and the Federal Trade Commission have recently started to widen the extent of competitor participation in merger proceedings by conducting an ‘open door’ policy These recent procedural developments in merger control have motivated us to explore potential policy deficiencies which might arise out of a conflict between legal due process and economic efficiency aspects: while, on the one hand, we have regulatory, procedural and practical reasons to take into account the competitors’ opinions such as their legal right to be heard or the authority’s past heavy reliance on third-party input resulting from its information deficit due to limited resources; on the other hand, from an efficiency standpoint, there is reason to believe that a certain degree of temptation exists on the part of the competitors to manipulate the authority so as to achieve a decision maximizing their own profits rather than welfare.

Objectives

Discussion

Conclusion