PREFACE

More than a decade after the European Union first introduced a common merger policy, this study evaluates the quality of that policy from a specific point of view, namely from the point of view of its predictability. It is argued that predictability is crucial for a welfare-enhancing merger policy and that European Merger Policy could be substantially improved on that score. European Merger Policy has already been subject to a number of reforms. A revised Merger Regulation came into effect in May 2004, which included a change in the substantive criterion to be used in order to assess whether a notified merger is compatible with the common market. Guidelines on horizontal mergers have also been introduced for the first time ever in European merger control. Additionally, after the Court of First Instance decided against the Commission in a number of widely publicized cases, a number of procedural changes have taken place within the European Commission’s Directorate General for Competition such as the appointment of a chief economist and the requirement for proposed merger decisions to be subjected b d to peer review. Although it is too early to evaluate the quality of these recent reforms based on experience, all of them are critically evaluated on theoretical grounds in this study. But we do not stop there. We believe that the reforms did not go far enough and thus develop a number of substantial as well as procedural proposals for how European merger policy could be further improved. In a sense, we try to open the debate for yet another round of reforms.

This study was sponsored by the European Round Table of Industrialists (ERT), a forum of some 45 leaders of major industrial companies whose headquarters are in Europe. ERT Members were concerned that the goals agreed upon by the European Council in Lisbon in March 2000 that aim at making the European Union “the most competitive and dynamic knowledge-based economy in the world” by 2010 called for EU competition policy to better reflect economic and market realities and to become more predictable and accountable. This led ERT Members to commission an academic study on the importance of predictability to successful competition policy. This study would not have been possible without the active support of the members of the ERT Competition Policy Working Group, chaired by Alain Joly. As economists from academia, we greatly benefited from the opportunity to discuss our hypotheses
and preliminary results with the members of the ERT Working Group, all business-based competition specialists who have been involved in merger cases with the Commission. Our various discussions with the Head and members of the Commission’s now defunct Merger Task Force proved equally useful. Special thanks to Claes Bengtsson who read the entire manuscript and made a number of critical remarks. Others who made very valuable comments include Ulrich Immenga, Manfred E. Streit, and Ingo Schmidt. Last but not least, two of our publisher’s anonymous referees helped with additional suggestions.