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At a Brussels lunchtime meeting with the European Centre for Advanced Research in Economics, Université Libre de Bruxelles, on 14 June, Paul Seabright and Damien Neven presented the major findings of their new book, Merger in Daylight: The Economics and Politics of Merger Control in Europe, written jointly with Robin Nuttall. Neven is Professor of Economics at Université de Liège, Associate Professor of Economics at INSEAD, Fontainebleau, and a Research Fellow in CEPR's International Trade and Applied Microeconomics programmes. Nuttall is a research student at the University of Cambridge and a Henry Fellow-Elect at Harvard University. Seabright is Fellow and Director of Studies in Economics at Churchill College, Cambridge, and a Research Fellow in CEPR's Applied Microeconomics programme. The meeting formed part of CEPR's research programme on `Market Structure, Industrial Organization and Competition Policy', funded by the Commission of the European Communities under its SPES programme. The views expressed by the speakers were their own, however, not those of the Commission of the European Communities nor of CEPR, which takes no institutional policy positions.The study focused on the European Community's new Merger Regulation which came into force in September 1990. The thresholds determining which mergers fall under the respective jurisdictions of the European Commission and member states' national authorities are to be reviewed by end-1993, while wider controversies over the Maastricht Treaty have also prompted a re-examination of European integration. Since there are no published Merger Guidelines as found in the US, for example, any assessment of European merger control must be based on confidential information, while the Commission's procedures must be inferred from its published decisions on individual cases. Examination of the 140 published decisions to March 1993 indicated that the new system is administratively efficient but suffers from important weaknesses. Decisions are often based on sketchily-presented judgments, with the weights accorded to different factors varying from case to case. They have tended to favour firms seeking treatment under the Regulation rather than the more cumbersome Article 85 or 86 procedures or national authorities. The Commission's flexibility therefore risks distortion in favour of interest groups and firms with the greatest lobbying power. Neven and Seabright also reported the results of survey of firms that have been subject to the Commission's investigations, which broadly supported this interpretation. Such firms and their advisers were generally pleased with the operation of the Regulation and felt that they enjoyed enough bargaining power to extract significant concessions from the Commission. Of the 59 respondents, 63% believed that most of the information the Merger Task Force required was relevant, 86% that its officials were willing to listen to their points of view, and 75% that they appreciated most of the commercial realities companies face. Firms' choice of advisors also indicated their belief in the value of lobbying. Some 83% employed specialist law firms while only 14% employed economic consultants, 15% employed public relations firms and 8% professional lobbyists. Politicians took up cases for 15%, while 22% received the support of national civil servants; since most cases were not contested, the latter figures formed remarkably high proportions of those that were. In particular, firms involved in joint ventures (whose jurisdiction is subject to considerable ambiguity) were relatively likely to engage in lobbying. German firms were both less prone to engage in lobbying and more likely to be satisfied with the resulting outcomes, which may indicate that they received more favourable treatment than they would have from the Bundeskartellamt. Neven and Seabright concluded that the institutions charged with implementing merger control are unnecessarily open to manipulation, while the lack of separation between investigations and decisions allows the Merger Task Force's analyses to be written in a way which justifies decisions already taken on other grounds. The procedure's opacity leads to confusion and a lack of accountability. They proposed three major reforms. First, the regular publication of draft decisions before they are laid before the Commission would promote transparency and eliminate the current practice of selective leaking to the press and to officials of member states. Second, in the longer term, responsibility for merger notification and investigation could be hived off to a separate agency, with the Commission retaining powers of negotiation and decision. Third, regulators should allow an explicit `efficiency defence' to consider claims of synergies and other gains from a merger, which at present appear to play some part in the procedure but are never explicitly admitted and therefore not accorded a proper and objective evaluation. |
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