Diminishing Incentives to Reveal Efficiency-Related Evidence: An Empirical Analysis of EC Merger Cases

Abstract

An unbiased regulatory analysis of mergers should consider both their potential benefits (efficiencies) and the resulting harm (reduced competition). Information asymmetry between the merging parties and the competition authority makes the assessment of the former a challenging task. For this reason, competition authorities have an interest in encouraging merging parties to bring forward all available efficiency-related evidence. This paper looks at the European Commission's practice between 1999 and 2009 to find out whether firms are provided sufficient incentives to reveal information on efficiencies. Evidence is presented that efficiency claims jeopardize the success of mergers by significantly delaying regulatory approval. As the European Community Merger Regulation (ECMR) allows firms to decide how much information to reveal on efficiencies, this may mean that efficiency claims are only made in cases where delay matters less for the merging parties, for example, when the merger is not expected to generate large amounts of cost savings. Given this controversy, this article discusses the suitability of introducing further incentives to present efficiency-related evidence in EC merger cases.