Merger Control Regime Research Articles

An Economic Perspective on the Jurisdictional Reform of the European Merger Control System

The jurisdictional elements of the comprehensive 2004 reform of EU merger control are worth being analysed against the background of economic theory. Competence allocation and delimitation represent important factors for the workability of multilevel merger control regimes. The economics of federalism offer an analytical framework that can be adopted in a modified version in order to assess competence allocation regimes in competition policy. According to these theoretical insights, a given competence allocation and delimitation regime can be evaluated in regard to four criteria: internalisation of externalities, cost efficiency (the one-stop-shop principle), preference orientation, and adaptability. The old competence allocation and delimitation regime of EU merger control consisted of two elements: turnover thresholds and post-notification referrals. Analysis along the lines of the economics of federalism reveals considerable deficiencies of the old regime. Thus, the results of the theoretical analysis are compatible to the dissatisfying empirical experience, which represented a major motivation for launching the reform process. However, the actual reform eventually left the turnover thresholds untouched. The main element of the jurisdictional reform was the introduction of pre-notification referrals and the addition of institutionalised network cooperation. Against the background of the economics of federalism, one must conclude that the reform failed to significantly improve competence allocation in EU merger control. The internalisation of externalities, preference orientation, and adaptability have not been improved. Regarding the cost efficiency criterion, early, anecdotic and provisional empirical evidence hints towards minor improvements of the one-stop-shop principle, albeit merely in its centralising variant. This is contradicted by an increased opaqueness of the overall system due to the higher degree of complexity of the referral regime. The economic analysis in this paper shows that the underlying problems of jurisdictional issues of the multilevel EU Merger Control System have yet to be sufficiently solved. Therefore, this article predicts that jurisdictional issues will remain on the reform agenda.

The GE/Honeywell merger controversy and the path to analytical convergence in international merger assessment: A critical commentary

Globalisation, with its concomitant rise in international merger activity, allied to the proliferation of merger control regimes vetting such activity, increases the likelihood of two or more competition authorities reaching divergent decisions in the same case. This article reveals that this situation arose in the proposed merger between two US-based companies, General Electric (GE) and Honeywell, with the EU prohibiting the merger, and the US Department of Justice approving it. Further, it discusses the analytical and interpretational differences which led to those divergent outcomes. The analytical debate centres on the appropriateness of the two theoretical approaches used to assess proposed mergers, with the EU using the range effects of competitive harm approach and the US giving greater weight to an economic efficiencies merger defence. The fallout from the GE/Honeywell case has given added impetus to progress analytical convergence in relation to the vetting of international mergers. This has found expression at the multilateral level, which links to EU initiatives. The article predicts that the EU is highly likely to incorporate an economic efficiencies defence into its merger control law, bringing it into line with other key players. Of course, analytical convergence cannot guarantee that interpretational differences will not arise, as was evident in aspects of the GE/Honeywell case.

EU merger control reforms:: An appraisal

Important changes to the EU merger control regime come into force on 1 March 1998. Instead of a reduction in the overall turnover thresholds which the European Commission has advocated for many years, supplementary thresholds will be introduced to extend the benefits of the Regulation's `one stop shop'. A change in policy towards joint ventures means that more joint ventures will be covered by the Regulation than previously. This article assesses the implications of these two major jurisdictional changes as well as several modifications which will tidy up the treatment of large Community-level mergers by Brussels. Understanding the reforms can help managers to improve their firm's strategies and reduce legal costs.