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EU Merger Control - A Legal and Economic Analysis by Kokkoris, Ioannis, Shelanski, Howard (1/1/2014)

1 Introduction

From: EU Merger Control: A Legal and Economic Analysis

Ioannis Kokkoris, Howard Shelanski

Merger control — Legal and soft-law instruments governing — Procedure under the Merger Regulation — Mechanics of system

(p. 1) Introduction

1.01  The term ‘merger’ as used by company and competition law refers to a broad range of corporate transactions.1 Simply put, however, a merger is the consolidation of two independent entities. An acquisition occurs when one company buys another, whether through a friendly transaction in which the companies cooperate during negotiations or through a ‘hostile’ acquisition in which the takeover target is unwilling or had no prior knowledge of the offer.2

1.02  In a typical merger, the boards of directors of two firms first agree to combine and then if relevant seek stockholder approval for the combination. In a tender offer, the acquiring firm typically offers a price higher than the target firm’s market price prior to the acquisition and invites stockholders in the target firm to tender their shares for the price. In a purchase of assets, one firm acquires the assets of another, although the shareholders of the acquired firm must still hold a formal vote.3

(p. 2) 1.03  Mergers and acquisitions have become strategic devices in the business world. The key objective behind buying a company is to create shareholder value over and above that of the sum of the two companies. There are primarily two ways to achieve growth as a business: organically and inorganically. A firm focusing on organic growth aims to grow its business over time by broadening its customer base and increasing sales. Inorganic growth, on the other hand, provides the organization with an opportunity to accelerate its growth almost instantaneously. Mergers and acquisitions are two of the most important means to inorganic growth.

1.04  Companies engage in mergers and acquisitions primarily to create a higher shareholder value than the sum of the companies involved. This happens when the merger/acquisition provides an opportunity for the new or acquiring company to either increase revenue or to reduce cost. There are several ways a company can increase revenue:

  • •  The company can foresee new business opportunities or foresee a new target market and develop new products through currently available technical know-how.

  • •  The company can increase its control over price and output levels in relevant markets.

  • •  The company is able to increase product range.

  • •  The company can capitalize on products of the previously separate companies.

  • •  The company is able to rationalize staff.

1.05  Merging internationally provides an immediate growth opportunity to a firm that once operated only within one country. There are various factors that encourage a firm to merge internationally for growth:

  • •  A firm with surplus cash flows operating in a slowly growing economy can invest its cash in a faster-growing economy.

  • •  If the domestic markets are too small to accommodate growth or if they have already reached saturation, the corporation can seek international markets.

  • •  Overseas expansion may sometimes enable the mid-sized companies to increase their capacity and their ability to compete.

  • •  Size enables the companies to achieve economies of scale.

  • •  International mergers provide diversification both in geographical location and by product line. By operating in uncorrelated economies, international mergers reduce the earnings risk related to operations in a single economy, and thus reduce systematic and unsystematic risk.

A. Reasons for Mergers and Acquisitions

1.06  Firms merge for many reasons. Mergers may offer many benefits—firms will often choose mergers or acquisitions to increase profits and sustain their viability and profitability over time. They can enhance corporate and wider economic performance (p. 3) by improving the efficiency with which business assets are used. Further reasons for firms to engage in mergers and acquisitions include efficiencies arising from the mergers4 and the tendency of some countries to endorse the concept of ‘national champions’.5 In addition, mergers allow a firm to exit the industry while simultaneously reaping a monetary reward or compensation for its initial investments and the risks it took on. Furthermore, mergers may also satisfy executives’ ambitions for more power and greater control.6

1.07  Generally, mergers and acquisitions can induce the following:

  • •  Increased revenue as a result of new products or development capacity, increased prices, new customers, new markets, access to new distribution channels, and reorganization of human resources.

  • (p. 4) •  Operations and cost improvement as a result of reduced overhead duplication and personnel costs and improvements in supply chain, procurement, manufacturing, and distribution.

  • •  Market positioning as a result of market leadership and vertical integration.

1.08  One of the most important reasons for a merger is the resulting synergies. One of the most common reasons for firms to merge is that the new entity may be more economically efficient. There are different aspects in which mergers may yield efficiency gains.

1.09  Economies of scope refer to the cost savings that might be realized as a result of increasing the number of different goods produced. Economies of scope refer to situations where the joint output of a single firm is greater than the output that could be achieved by two different firms each producing a single product (with equivalent production inputs allocated between the two firms).7 Economies of scope are conceptually similar to economies of scale.

1.10  Economies of scale refer to the cost advantages a business obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. This is a commonly used argument for a merger. However it is important to understand the source of the economies of scale and assess whether or not they cannot be achieved through means other than the merger. Economies of scale may be divided into short- and long-run economies of scale.8

1.11  Economies of scale refer to efficiencies associated with increasing or decreasing the scale of production and refer to changes in the output of a single product type. Economies of scope refer to efficiencies associated with increasing or decreasing the scope of marketing and distribution and to changes in the number of different types of products. While economies of scale refer primarily to supply-side changes (such as level of production), economies of scope refer to demand-side changes (such as marketing and distribution).

1.12  Technological progress results from increased incentives for research and development. Technological progress is often generated by process innovations, which reduce the cost of production, and product innovations, which increase the value of a product. Advancements in technology nearly always guarantee synergy.9 Companies that (p. 5) acquire technology-focused firms relevant to their business application can develop a competitive edge. Similarly, new technology can lead to aggressive product development and cost reduction.

1.13  Purchasing economies can be described as follows: small firms often need to purchase their input at a higher price than the marginal cost. A merger between two small firms may increase their bargaining power and put more pressure on their input suppliers, thus enabling the merging firms to purchase their input at lower prices and reduce their costs.

1.14  Often mergers occur simply because one firm is in a market that another wants to enter. By buying firms in other businesses and diversifying, acquiring firms’ managers believe they can reduce earnings volatility and risk and increase potential value. Firms that are undervalued by financial markets are often targeted for acquisition by those who recognize this mispricing. The acquirer can then gain the difference between the value and the purchase price as surplus.

1.15  By buying the targeted firm, all of its experience and resources are available to the acquirer. One firm may simply wish to purchase the resources of another firm or to combine the resources of the two firms. These resources may be tangible resources such as plant and equipment, or they may be intangible resources such as trade secrets, patents, copyrights, leases, etc., or the talents of the target company’s employees. A merger facilitates the streamlining of human capital resources. When companies merge, major changes occur in corporate culture, management styles, business direction, and key operating procedures. This gives opportunity for human capital to be rationalized and for upper management to keep only those who are most competent and valuable to the company. Some companies make knowledge transfer a primary objective in merger integration, particularly when each organization has strengths that contribute to the value of the merger. This knowledge exchange helps the acquired organization introduce new practices which can generate revenue and accelerate cost improvements. There are also factors that mitigate the positive effects of streamlining human capital: intra-company political struggles, demotivation amongst retained employees, and difficulties in the amalgamation of different corporate cultures.

1.16  There are a number of financial synergies that can arise from a merger. With financial synergies, the pay-off can take the form of either higher cash flows or a lower cost of capital (discount rate). The combination of a firm that has excess cash with a firm that has high-return projects (but limited cash) can yield a pay-off of a higher value for the combined firm. This synergy most often arises when large firms acquire smaller firms. The effect that a merger has on the cost of capital of the combined or acquiring firms results from the lower cost of internal versus external financing. A combination of firms with different cash-flow positions and investment scenarios may produce the synergic effect and achieve lower cost of capital. The merged entity’s capacity for debt can increase, because when two firms combine, their earnings and cash flows may become more stable and predictable. This in turn allows (p. 6) them to borrow more than they could have as individual entities, which creates a tax benefit for the combined firm. The stabilization of the cash flow would lead the suppliers to trust the firm.

1.17  Although tax savings may not be a primary motivation for a merger, when a purchase of either the assets or common stock of a company takes place, the tender offer less the stock’s purchase price can represent a gain for the target company’s shareholders. For example, a profitable firm that acquires a loss-making firm may be able to use the net operating losses of the latter to reduce its tax burden. Auerbauch and Reishus (1988)10 concluded, however, that tax considerations probably do not play a significant role in prompting companies to merge.

B. Are Mergers/Acquisitions Profitable?

1.18  Event studies—that is, studies of stock returns around the date of merger announcements—generally conclude that the value of the combined firm increases significantly in most takeovers. These studies can have many applications in accounting and finance research. ‘Event studies are now an important part of finance, especially corporate finance. The results stand up to replication and the empirical regularities, some rather surprising, are the impetus for theoretical work to explain them’.11 They can be used to evaluate the impact of several economic events on stock prices by examining the firms’ stock returns. Eligible events are stock splits, a debt-for-equity swap executed by a company, earnings announcements, mergers and acquisitions, and announcements of macroeconomic variables important to the firm.12

(p. 7) 1.19  According to the ‘market power’ hypothesis, a horizontal merger will encourage industry-wide collusion or dominant-firm pricing, which causes an increase in quality-adjusted product price and/or a reduction in output. This effect is one of the key reasons for merger control regulation. The resulting price change benefits all firms in the industry. Thus, the stock prices of the merging firms and their rivals’ rise. The two studies by Eckbo (1983) and Stillman (1983) reject the market power hypothesis because rival firms do not show the predicted sequence of abnormal performance. Eckbo (1983) finds that rival firms, in mergers challenged by the Federal Trade Commission (FTC), show statistically significant gains in response to the announcement that a complaint has been lodged, which is inconsistent with the collusion argument. However, Duso, Neven, and Röller (2006)13 find evidence in support of the market power hypothesis.14

1.20  Bradley, Desai, and Kim (1988)15 examined a sample of 236 inter-firms’ tender offers between 1963 and 1984 and reported that the combined value of the target and bidder firms increased 7.48 per cent (US$117 million in 1984 dollars) on average upon the announcement of the merger. Jensen and Ruback (1983)16 reviewed 13 studies that look at returns around takeover announcements and reported an average excess return of 30 per cent to target stockholders in successful tender offers, and 20 per cent to target stockholders in successful mergers. Jarrell, Brickley, and Netter (1988)17 reviewed the results of 663 tender offers made between 1962 and 1985 and noted that premiums averaged 19 per cent in the 1960s, 35 per cent in the 1970s, and 30 per cent between 1980 and 1985.

1.21  Duso, Gugler, and Yurtoglu (2006)18 analyse the economic effects of EUMR decisions and distinguish between prohibitions, clearances with commitments (either behavioural or structural), and outright clearances. They implement an event study on merging and rival firms’ stocks to quantify the profitability effects of mergers and merger control decisions.

(p. 8) 1.22  The authors argue that after the merger, insider firms’ profitability should rise due to higher market power and efficiency. Hence, their cumulative average abnormal returns around the announcement of the merger should be positive. Rival firms’ profitability—and hence their cumulative average abnormal returns around the merger announcement—should rise only if the merger increases product market prices (that is, the market power effect is larger than the efficiency effect) and should diminish if the reverse is true.

1.23  Their results suggest that outright prohibitions solve the competitive problems generated by the merger. On the other hand, remedies, on average, are not always effective in resolving the market power concerns. However, both structural (for example, divestitures) and behavioural remedies help restore effective competition when correctly applied to mergers having an adverse impact on competition during the first phase investigation. In contrast, when applied after the second phase investigation, they seem to be ineffective. Finally, remedies, especially behavioural ones, seem to constitute a rent transfer from merging firms to rivals when mistakenly applied to pro-competitive mergers.19 Duso, Neven, and Röller (2003)20 conducted an event study and on the basis of that analysis evaluated the adverse consequences of these mergers. They identified instances where the Commission has prohibited mergers that the stock market regarded as pro-competitive (type I errors) as well as instances where the EU has failed to prevent mergers that were regarded as adverse to competition (type II errors).

1.24  Their data suggest that the Commission made a type I error in four of the fourteen prohibitions (28 per cent). They identified as type I errors two cases that have later been overturned on appeal (Airtours/First Choice21 and Tetra Laval/Sidel)22 and one case (General Electric/Honeywell)23 that has been highly controversial and was successfully appealed by the merging parties, as regards the non-horizontal competitive harm that the merger allegedly induced.24 Regarding type II errors, the authors suggest that the Commission made an error in about 23 per cent of the cases that it has allowed without conditions.25

1.25  In addition, their results suggest that the Commission’s decisions cannot be explained solely by a motivation to protect consumer surplus and are not sensitive to firms’ interests, while the institutional and political environment plays an (p. 9) influencing role. Factors such as country and industry effects, as well as market definition and procedural aspects also play significant roles.

1.26  The results of event studies have been interpreted with caution, however, since the increase in the value of the combined firm after a merger is also consistent with a number of other hypotheses explaining acquisitions, including undervaluation and changes in corporate control.

1.27  Stock market data may not fully capture the truth about market power or cost reduction possibilities. One could argue that the stock market’s initial reaction to the announcement of the merger may be biased due to the expectation by the investors of the competition authority’s decision (and thus it is ‘priced in’ their initial reaction). The market takes the antitrust procedure into account at the time of announcement.26 Hence, the change in the value of the stock at the time of the announcement is equal to the probability that the deal will be cleared times the value that will accrue if the merger is realized. Although event studies are an important empirical tool, they have certain pitfalls. There may be abnormal return prior to and after the event date, attributable to the event in question. Provided that insider-trading rules were obeyed and suitably enforced, there should be no abnormal return around the event date. However, there are instances where information is revealed to a small number of individuals before the actual announcement date, and thus the stock price changes before the event date. The individuals with access to important information may reveal it and thus cause a significant shift in securities’ prices. An abnormal return after the event date can occur because the event was announced after the markets closed on the event day—and thus the impact of the event is reflected in prices and trades the day after. Abnormal return after the date of the event is also due to the time it takes for the released information to have an impact on prices.

1.28  A number of studies have tried to compare ex ante predictions through event studies with ex post realizations. Using samples from different mergers, Ravenscraft and Pascoe (1989),27 Healy et al. (1992),28 as well as Kaplan and Weisbach (1992)29 found that the ex ante stock market returns are positively and significantly correlated with ex post performance. Existing studies typically report that the announcement of mergers triggers relatively large changes in stock market prices.30 A change in stock prices is likely to provide an unbiased estimate of the change in profit.

(p. 10) C. Purpose of Merger Legislation

1.29  Merger control has a significant role in today’s economies, a fact which is underscored by the ever increasing number of mergers that are completed. Figure 1.1 illustrates the evolution of notified cases before the European Commission.31

Figure 1.1  Number of merger decisions per year.

1.30  The purpose of merger laws is to capture mergers and acquisitions of undertakings32 that may have adverse effects on competition. To ensure that such reorganization of cooperation does not cause lasting damage to competition, it is important to regulate concentrations that will significantly impede effective competition in the common market or in a substantial part of it. Merger control is not about the protection of individual shareholder’s interests. These are issues that company laws tackle. Merger control is carried out in the public interest rather than on behalf of shareholders.

1.31  The adoption of Regulation 4064/89 in 1989 was the first step taken as far as mergers are concerned. The main concern of merger control is to maintain a competitive market structure. Most mergers are examined ex ante, although in some jurisdictions (for example, the UK) they may also be investigated ex post. Merger control must therefore determine whether a merger will lead to a less competitive market. (p. 11) This is generally contingent upon what type of merger it is (horizontal mergers affect the market structure differently than non-horizontal mergers do).

1.32  As previously noted, the purpose of the EUMR is to sustain a thriving internal market by ensuring that reorganizations in the market will not stifle competition.33 Mergers may eliminate any competition that exists between the merging parties and may reduce the number of firms competing in the market. Where this reduction has a substantial adverse effect on overall market competition, the market will be less oriented towards consumer and efficiency goals, even in the absence of breaches of competition legislation.

1.33  In order to sustain the competitive structure of the post-merger market, competition authorities must apply a legal substantive test to determine the likelihood that the merger will have an adverse impact on competition; they must also know what level and quality of evidence they need in their assessment of whether or not the merger should be prohibited. The Recast EUMR applies the Substantial Impediment to Effective Competition (SIEC) test34 as the legal substantive test for the assessment of mergers. The issue of evidence is a matter that has been determined by the General Court (GC) and the European Court of Justice (ECJ).

1.34  The majority of mergers have been cleared by the European Commission in the first phase of merger assessment, some of them with commitments. A very small number have been cleared during the second phase of assessment, again, some of them with commitments; an even smaller number of cases have been prohibited, as Figure 1.2 illustrates.35

Figure 1.2  Mergers by decision type.

1.35  It is important to define further two concepts at the heart of the EUMR. These two concepts are non-coordinated, or unilateral, effects and coordinated effects.

1.36  Mergers can produce unilateral effects if the combined firm’s market power increases after the competitive restraints the merging firms exercised upon each other are eliminated. Unilateral effects refer to the overall detrimental effects resulting from changes or adjustments in prices and output made unilaterally by the post-merger firm. Coordinated effects, refer to the overall detrimental effects of anticompetitive conduct that result from a merger likely to render collusion in the post-merger market.36

(p. 12) 1.37  Furthermore, non-merging firms in the same market can also benefit from the diminished competition resulting from the merger, since the merging firms’ price increase may divert some demand to the rival firms. These, in turn, may find it profitable to increase their prices (non-collusive oligopoly scenario). Thus, even if rival firms pursue the same competitive strategies as they did prior to the merger, this can induce them to increase prices in the post-merger market. In such cases, the firms in the marketplace are not coordinating their competitive behaviour, merely reacting to changes in each other’s behaviour.

1.38  Non-coordinated effects (or unilateral effects) arise when firms producing nearly identical products merge.37 The combined entity is more likely to increase product price post-merger than if competitors whose products are less similar merge. If other companies in the market can alter their product line to offer products nearly identical to those of the merged entity, these effects will be mitigated.38

1.39  Coordinated effects, arise in market structures that are prone to collusion. The General Court in Airtours articulated three criteria for coordination to be likely in the post-merger market. These criteria are transparency, retaliation mechanisms, and lack of countervailing reactions from consumers and competitors. The market structure that is prone to coordinated effects is characterized inter alia by product (p. 13) homogeneity,39 low demand growth,40 low price sensitivity of demand,41 symmetric cost structures,42 and multi-market contacts.43

1.40  Let us briefly define the concepts of horizontal, vertical, and conglomerate mergers.44 Horizontal mergers are mergers between parties that operate in the same relevant market. Such mergers can increase the market power of the merging firms so that they could unilaterally impose a profitable post-merger price increase. Other firms in the market might unilaterally raise their prices in response. Thus, rivalry might be weakened. Moreover, a horizontal merger may increase the likelihood of (and/or stability and sustainability of) collusion, either tacit or explicit, between the remaining firms in the market.

1.41  Horizontal mergers can therefore significantly impede effective competition in two ways: eliminating competition by removing important competitive constraints on one or more firms (unilateral effects), and/or creating and reinforcing a situation where competition is reduced by coordination.

1.42  Vertical mergers are mergers between parties operating at different levels of an industry. Such mergers, although often pro-competitive, may in some circumstances reduce competitive constraints on the merged firm resulting from increased barriers to entry, raising rivals’ costs, substantial market foreclosure, or increased likelihood of collusion. However, this risk is unlikely to arise except in the presence of existing market power or in markets where there is already significant vertical integration as well as vertical restraints.45

1.43  Conglomerate mergers are mergers between firms that have no connection to each other in any product market. Such mergers rarely harm competition solely as a result of their conglomerate effects. The potentially adverse effects of these mergers (p. 14) can be identified by so-called portfolio power. A firm may be said to have ‘portfolio power’ when the market power derived from a portfolio of brands exceeds the sum of its parts. This may enable the firm to exercise market power in individual markets more effectively, thereby harming competition.

1.44  Non-horizontal mergers are often pro-competitive, since such mergers do not remove direct competitive constrains as effectively as horizontal ones. Non-horizontal mergers generally incite merged firms to lower their prices, since there is a complementary relationship between their products, such that a decrease in the price of one product may increase the sales of another product. Large conglomerates may seek to require or encourage customers to purchase a range of their products, whether through tying together or bundling products or through significant discounts targeted at non-portfolio rivals’ customers.


1  The term ‘concentration’ used in Regulation 4064/89 (Council Regulation (EC) No. 4064/89 of 21 December 1989 on the control of concentrations between undertakings [1989] OJ L 257/90 (republished)) covers a variety of transactions—acquisitions, takeovers, and certain types of joint ventures. In this book, unless otherwise specified, the term ‘merger’ will be used as a synonym for concentration and therefore covers all the above types of transactions.

2  An acquisition may be only slightly different from a merger. Like mergers, acquisitions are actions through which companies seek economies of scale, efficiency, and enhanced market visibility. Unlike mergers (where there normally exists an exchange of stock or consolidation into a new company), all acquisitions involve one firm purchasing another. While acquisitions are often friendly, they can also be hostile. Occasionally a company assumes it is acquiring another, but the partner emerges as the stronger party and dominates the management of the merged business (effectively a reverse takeover).

3  In some cases, a firm is acquired by its own management or by a group of investors, usually with a tender offer. The acquired firm can then become a private business rather than a publicly traded firm. These acquisitions are called management buyouts if managers are involved and leveraged buyouts if the funds for the tender offer come predominantly from debt.

4  Including economies of scale and economies of scope. Economies of scale refer to the overall decrease in average production costs as output rises. See further: D. Begg, S. Fischer, and R. Dornbusch, Economics (5th edn, London: McGraw-Hill, 1997), 109.

5  The term generally refers to government support for a merger between two domestic firms to create a more powerful entity, often also expressly opposing the takeover of one of the domestic firms by a foreign company. A ‘national champion’ is a domestic firm able—post-merger—to successfully compete in international markets. An obvious example would be government support for a merger that would either enable a national firm to compete effectively in international markets or enhance its ability to do so. Government opposition to foreign takeovers of prestigious national firms or to foreign involvement in key domestic industries to protect national champions has proven to be highly controversial, often inherently capable of conflicting with competition law analysis. Establishment of national champions through ‘manipulation’ of mergers is not accepted by the European Commission—not if it harms competition in the EU member states. Pursuant to Article 21(4) EUMR member states are entitled to ‘take appropriate measures to protect legitimate interests other than those taken into consideration by [the EUMR] and compatible with the general principles and other provisions of Community law’. Unless these legitimate interests refer to public security, plurality of the media, or prudential rules, member states must request authorization from the Commission. Industrial policy in general or the creation of national champions in particular is not included in the legitimate interests mentioned in the article. Galloway refers to cases where there was an attempt for national interests to be applied. An example of a case involving a national champion was the German energy company E.ON’s bid for Endesa. Valuing it considerably higher—the Spanish government sought to facilitate the Gas Natural bid while simultaneously trying to prevent E.ON from taking over Endesa. The Spanish competition authority recommended that the merger should be blocked but the Spanish Council of Ministers decided to approve the merger subject to conditions. There are other such cases, although most are settled following pressure from the Commission. In the proposed merger between Italian bank Unicredit and German bank Bayerische Hypo-und Vereinsbank AG (HVB), although the Commission cleared the merger (Unicredito/HV, (Case COMP/M.3894) [2005] OJ C278/17), the Polish treasury (due to the control of Polish subsidiaries Pekao and BPH) required the disposal of the shares in BPH on 20 December 2005, but failed to request that the Commission take account of legitimate interests under Art. 21(4) EUMR. Strict conditions were imposed upon the merging parties, including a requirement for the disposal of part of BPH within 30 months. J. Galloway, ‘The Pursuit of National Champions: The Intersection of Competition Law and Industrial Policy’ [2007] 28(3) ECLR, 172–86.

6  Managers may be interested in the size, growth, or risk diversification of the company they run. Owners of firms may sometimes give managers incentives in their contracts to achieve some of these goals (ie, increasing the firm’s size in the marketplace). See further: M. Motta, Competition Policy: Theory and Practice (Cambridge: Cambridge University Press, 2004), 243. At the same time, the threat of hostile takeovers may function as a disciplining device to the management of a firm. Many firms face the implications of different incentives between owners and managers. This, among other things, may result in internal inefficiencies, or slack. Internal inefficiencies may lower the firm’s stock price, inducing other companies to buy the firm, which might not be desirable for the owners of the firm.

7  See further: R. Pindyck and D. Rubinfeld, Microeconomics (4th edn, Upper Saddle River, NJ: Prentice Hall International, 1998), 227.

8  In conglomerate mergers, economies of scales cannot always be achieved, especially if the merger is not managed adequately. This is often because with two or more different business focuses, cost centres may not be consolidated as effectively as any one of the other forms of mergers and acquisitions (M&As). The different business models may require separate cost structures.

9  Some factors that can mitigate synergies include the cost involved of training and transferring technical know-how to new members of the new company.

10  A. J. Auerbauch and David Reishus, ‘The Effects of Taxation on the Merger Decision’ in A. J. Auerbauch (ed.), Corporate Takeovers: Causes and Consequences (UMI, National Bureau of Economic Research Inc. 1988), 157–90.

11  F. E. Fama, ‘Efficient Capital Markets II’, [1991] 46 Journal of Finance, 1575–617.

12  Literature on the application of event study methodology on merger assessment includes A. Cox and J. Portes, ‘Mergers in Regulated Industries: The Uses and Abuses of Event Studies’ [1998] 14 Journal of Regulatory Economics, 281–304; E. N. Aktas, E. de Bodt, and R. Roll, Market Response to European Regulation of Business Combinations (Mimeo: University of Louvain, Belgium, 2003); T. Duso, L-H. Röller, and D. Neven, ‘The Political Economy of European Merger Control: Evidence using Stock Market Data’, Discussion Paper FS IV 02-34, Wissenschaftszentrum, Berlin, April 2003, <http://bibliothek.wzb.eu/pdf/2002/iv02-34r.pdf> accessed 16 Sept. 2013; I. Kokkoris, ‘Event Studies in Merger Assessment: Successes and Failures’, [2007] 3(1) European Competition Journal, 65–99; V. Capkun and M. Semenova, ‘Market reaction to merger approval process of the European Commission’, [2004], <http://www.hec.unil.ch/urccf/recherche/publications/mna2004_draft.pdf> accessed 13 Sept. 2013. B. E Eckbo, ‘Horizontal mergers, collusion, and stockholder wealth’, [1983] 11 Journal of Financial Economics, 241–73; R. Stillman, ‘Examining antitrust policy towards horizontal mergers’ [1983] 11 Journal of Financial Economics, 225–40; B. E Eckbo and P. Wier, ‘Antimerger policy under the Hart-Scott-Rodino Act: A reexamination of the market power hypothesis’ [1985] 28 Journal of Law and Economics, 119–49; T. Duso, D. Neven, and L-H. Röller, ‘The Political Economy of European Merger Control: Evidence using Stock Market Data’ [2007] 50 Journal of Law and Economics, <http://bibliothek.wzb.eu/pdf/2002/iv02-34r.pdf> accessed 16 Sept. 2013; T. Duso, K. Gugler, and B. Yurtoglu, ‘How Effective is European Merger Control?’ (Discussion Paper No. 153, Governance and the Efficiency of Economics Systems, July 2006), <http://www.wu.ac.at/iqv/mitarbeiter/gugler/dgy_eer.pdf> accessed 13 Sept. 2013; X. Gong and P. Panayides, ‘The Stock Market Reaction to Merger and Acquisition Announcements in Liner Shipping’, [2002] 4 International Journal of Maritime Economics, 55–80.

13  Duso, Neven, and Röller (n 12).

14  See further: Duso, Gugler, and Yurtoglu (n 12).

15  M. Bradley, A. Desai, and E. Han Kim, ‘Synergistic Gains from Corporate Acquisitions and their Division between the Stockholders of Target and Acquiring firms’, [1988] 21 Journal of Financial Economics, 3–40.

16  M. Jensen and R. Ruback, ‘The Market for Corporate Control’, [April 1983] Journal of Financial Economics, 5–50.

17  G. A. Jarrell, J. A. Brickley, and J. M. Netter, ‘The Market for Corporate Control: The Empirical Evidence since 1980’, [Winter 1988] 12(1) Journal of Economic Perspectives 49–68.

18  Duso, Gugler, and Yurtoglu (n 12).

19  Duso, Gugler, and Yurtoglu (n 12) at 1.

20  Duso, Röller, and Neven (n 12).

21  Case T-342/99 Airtours v Commission [2002] ECR II-2585.

22  Cases T-5/02, T-80/02 Tetra Laval B.V. v Commission [2002] ECR II-04381 and ECR II-04519.

23  Case T-210/01 General Electric v Commission [2005] ECR II-05575.

24  The General Court upheld the Commission’s analysis as far as the horizontal issues were concerned.

25  Duso, Röller, and Neven (n 12).

26  Aktas, de Bodt, and Roll (n 12); Duso, Röller, and Neven (n 12).

27  D. Ravenscraft and F. M Scherer, ‘Life After Takeovers’, [1987] 36 Journal of Industrial Economics, 147–56. Duso, Röller, and Neven (n 12).

28  P. K. Healy, K. G. Palepu, and R. Ruback, ‘Does Corporate Performance Improve After Mergers?’, [1992] 31 Journal of Financial Economics, 135–75. Duso, Röller, and Neven (n 12).

29  S. Kaplan and M. Weisbach, ‘The success of acquisitions: evidence from divestitures’, [1992] 47(1) Journal of Finance, 107–38. Duso, Röller, and Neven (n 12).

30  Aktas, de Bodt, and Roll (n 12); Duso, Röller, and Neven (n 12).

31  Data cover until end of 2012.

32  An undertaking is any entity engaged in an economic activity. See Case C-41/90 Höfner and Elser v Macroton. [1991] ECR I-01979. The definition includes natural persons exercising a profession on their own behalf and account or performing activity in the frame of exercising such profession as lawyers, physisians, architects, or similar professionals. The definition also includes a state’s commercial activities and associations. The definition excludes employees, trade unions, public services based on ‘solidarity’ for a ‘social purpose’, and sovereign functions of a state.

33  Recitals 2 and 3 of the preamble of the Recast EUMR, Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation), (‘Recast EUMR’ or ‘EUMR’), OJ L24, 29.01.2004, 1-22.

34  Article 2(3), Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation), (‘Recast EUMR’ or ‘EUMR’), OJ L24, 29.01.2004, 1-22.

35  Data cover until February 2013.

36  For a definition of unilateral and coordinated effects, see further: Joint U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines 1992, Sections 2.1 and 2.2, <http://www.ftc.gov/bc/docs/horizmer.htm> accessed 13 Sept. 2013.

37  Non-coordinated effects and unilateral effects are synonymous concepts. ‘Non-coordinated effects in oligopolistic markets’ refer to a more specific type of competitive harm (specifically in oligopolistic markets, ie, non-collusive oligopolies or gap mergers) induced from a merger compared to the more generic concept of unilateral effects.

38  WilmerHale’s Guide to EC Merger Regulation (4th edn), 51, <http://www.wilmerhale.com/pages/publicationsandNewsDetail.aspx?NewsPubId=90560> accessed 13 Sept. 2013.

39  This factor was considered in cases such as Gencor/Lonrho (Case IV/M.619) [1997] OJ L11/30 (Gencor/Lonrho); Nestlé/Perrier (Case No. IV/M.190) Commission Decision (92/5453/EEC) [1992] OJ L356/1 (Nestlé); Kali und Salz/MdK/Treuhand (Case No. IV/M.308) [1998] OJ C275/3, (Kali und Salz).

40  This factor was considered in cases such as Gencor/Lonrho (Case IV/M.619) [1997] OJ L11/30; Airtours/First Choice (Case No. IV/M.1524) [1999] OJ L C124/10.

41  This factor was considered in cases such as Gencor/Lonrho (Case IV/M.619) [1997] OJ L11/30; Nestlé/Perrier (Case No. IV/M.190) Commission Decision (92/5453/EEC) [1992] OJ L356/1; Airtours/First Choice.(Case No. IV/M.1524) [1999] OJ L C124/10.

42  This factor was considered in cases such as Gencor/Lonrho (Case IV/M.619) [1997] OJ L11/30; Nestlé/Perrier (Case No. IV/M.190) Commission Decision (92/5453/EEC) [1992] OJ L356/1; Stora Enso/AssilDoman/JV (Case COMP/M.2243) [2002] OJ C 351/02.

43  This factor was considered in cases such as Gencor/Lonrho (Case IV/M.619) [1997] OJ L11/30; Nestlé/Perrier (Case No. IV/M.190) Commission Decision (92/5453/EEC) [1992] OJ L356/1.

44  For the respective definitions, see further: ICN Merger Working Group, Analytical Framework Sub-group ‘The Analytical Framework for Merger Control’ (Final paper for ICN annual conference on 28 and 29 September 2002, Office of Fair Trading, London), 8.

45  The term congeneric mergers has also been used in the literature to refer to mergers that occur between two firms in the same general industry, who nonetheless have no mutual buyer/customer or supplier relationship, such as a merger between a bank and a leasing company.