Frontiers in International Antitrust
Jan. 3, 2003

Introduction
On January 3, 2003, the Joint Center hosted a conference on international antitrust, focusing on the interaction between the United States and the European Union (EU). The international panel included Damien Neven, Caglar Ozden, Michael Salinger and Simon Evenett. Mr. Neven and Mr. Ozden presented papers examining antitrust in the EU, which Mr. Salinger critiqued. Mr. Evenett then presented a paper on the deterrence effect of cartel enforcement.

Damien Neven, University of Geneva

Mr. Neven presented the findings of a paper co-written with Tomaso Duso and Lars-Hendrik Roller. Neven and his co-authors attempted to measure the extent to which the EU Commission is influenced by factors other than consumer surplus.

Mr. Neven and his co-authors considered two types of errors that the Commission could have made. The first type is the prohibition of a pro-competitive merger. A second type is the failure to prevent an anti-competitive merger. The authors compare the Commission’s decision to the reaction of the stock market to news of the proposed merger. A proposed merger that increased the share price for competitors was considered anti-competitive, while a proposed merger that decreased the share price for competitors was considered pro-competitive.

The authors’ study showed that the stock market often disagreed with the Commission’s decisions. The EU prohibited mergers that the stock markets regarded as pro-competitive in 28% of the cases. Similarly, the EU failed to prevent mergers that were considered anti-competitive in 23% of these cases. Of the four pro-competitive mergers that were blocked, two have been overturned by the EU court of first instance and a third, the controversial GE-Honeywell merger, is under appeal. Mr. Neven claimed this meant that in-depth reviews of individual cases were consistent with the event studies used in the paper. The authors also found that there have been more errors in the last few years than before, perhaps because of an increase in workload.

Mr. Neven and his co-authors attempt to explain the cause of these errors by analyzing the political economy. The merging firms were found to have some influence, but there was no evidence to support the hypothesis, put forth by others, that competitors have undue influence on the Commission’s decisions. However, the Commission is less likely to block anti-competitive mergers that originate from the largest EU countries or the Nordic states. Anti-competitive mergers are also less likely to be blocked during Phase I than Phase II, suggesting that more resources should be spent on Phase I or that more cases should be reviewed under Phase II.

Caglar Ozden, Emory University

Mr. Ozden presented the results of a paper he wrote with Owen Beelders. Ozden and Beelders examined the behavior of the EU Commission when choosing whether to review mergers involving firms from the U.S. and the EU.

Mr. Ozden explained that, ideally, antitrust agencies should base their decisions on the welfare impacts of mergers on consumers, competitors, and society at large. When the merger in question involves foreign firms, the question becomes more difficult as the authorities seek to protect their domestic consumers and competitors. In fact, such considerations are included in EU regulations. Mr. Ozden and his co-author attempted to measure this bias.

Ozden and Beelders collected data for over 200 mergers that involved at least one firm from the U.S. The authors regressed the decision to review (or not review) on several characteristics of the case. Mr. Ozden explained that larger mergers were more likely to be reviewed. The nationality of the acquired firm was found to be significant, with European acquisition targets triggering a review more often than American targets. In contrast, the nationality of the acquiring firm was not important. Similarly, the market presence of the merging firms in Europe was significant, but their market presence in the U.S. was not. Also significant was the market share of other (non-merging) American firms in the EU. The larger the market share of American firms in that industry in Europe, the more likely the merger was reviewed.

Michael Salinger, Boston University

Mr. Salinger commented on the presentations of Mr. Neven and Mr. Ozden. Mr. Salinger praised the Duso, Neven, and Roller paper for trying to assess whether mergers considered by the European Commission were beneficial or harmful to competition, but questioned the validity of using stock market reactions to measure effects on competition. Mr. Salinger was particularly skeptical of the high number of errors that Duso, Neven, and Roller found the Commission to have committed. Therefore, he thought the paper might overestimate the number of anti-competitive mergers that were approved.

Mr. Salinger said that the Beelders and Ozden paper was particularly interesting in light of the European Union's recent challenge of the GE-Honeywell merger. He offered the initial reaction that the number of Phase II investigations and required divestitures in mergers involving U.S. companies was high but said that one would need to know more about the structure of the European markets affected by the mergers to form a more complete assessment.