1 An Empirical Analysis of EU Merger Remedies

Mergers that substantially lessen competition are challenged by antitrust authorities. Instead of blocking anticompetitive transitions straight away, the authority might choose to negotiate with the merging parties and allow the transactions to proceed with modifications that restore or preserve the competition in the involved markets. We study a sample of 168 mergers that were under scrutiny of the European Commission in the period between 1990 and 2002. We use an event study methodology to identify the potential anticompetitive effects of mergers as well as of remedial provisions on these transactions. Stock market reactions at the merger’s announcement day provide information on the first question, whereas the stock market reactions at the Commission’s final decision day convey the information about the outcome of the bargaining process between the authority and the merging parties. We develop several hypotheses on the effects remedies should have depending on the merger’s competitive outcome. We find that remedies where not always appropriately imposed and, in general, they seem to hurt competitors. When applied in anticompetitive mergers, however, remedial actions achieve restoring effective competition, while they do not seem to hurt competition or reduce efficiency gains in mergers that the market assessed to be pro-competitive