کارایی ادعایی و یا ارائه راه حل؟ تجزیه و تحلیل استراتژی شکایت های قانونی در ادغام EC

Efficiency defence and merger remedies are key components in most merger control regimes. Although in many jurisdictions both the provision of efficiency-related evidence and remedy offers are at the merging firms' discretion, most previous works have only analysed them separately. This paper is an attempt to empirically model the system of decisions that firms face in merger litigation where they are allowed to choose what combination of efficiency claims and settlement offers to make. The main novelty of this work is the use of data from company reports on the merger-generated synergy expectations signalled to shareholders, which allows the direct empirical testing of some of the assumptions and findings from previous works. Evidence is presented that the current EC merger control regime is incapable of extracting information from firms on their efficiency expectations and the identity and experience of the legal advisor plays a key role in this; that pre-merger synergy expectations enhance the willingness to offer remedies; and finally, that the cost of delay plays a central role in designing firms' litigation strategy, especially when these costs exceed the cost of the remedy.

Merger control is focused on governing mergers that hinder competition and are large enough for this effect to be harmful for the society. When determining the competitive impact of a merger, the competition authority (CA) takes into account expected efficiencies put forward by the merging firms (efficiency defence). The efficiencies brought about by the merger can counteract the negative effects on competition and the potential harm to consumers. If these efficiencies are sufficient to outweigh the anticompetitive effects, the CA will approve the merger. In the absence of efficiency gains, anticompetitive mergers may also receive regulatory approval if parties to the merger offer a settlement package (merger remedy) to the CA, which modifies the notified merger transaction, as a result of which the anticompetitive effects are eliminated. The common factor in the two legal instruments – merger remedies and efficiency defence – in many jurisdictions is that they both have to be initiated by the merging parties. The CA is not in a position to impose remedies on the merging parties, but it can assess whether the remedies are capable of eliminating the competition problem. Similar rules apply to efficiency claims. Given the information asymmetry between the CA and the merging firms, the CA only takes those substantiated and likely efficiencies into account that were brought forward by the merging parties. In this regulatory framework, firms have to balance between the cost of divesting valuable assets, and the cost of a delay caused by the regulatory assessment of efficiencies. If the cost of delay is higher than the cost of divestiture, evidence on efficiencies may be withheld during the investigation. If delay is less costly than divestiture, firms will probably reveal efficiency evidence and offer smaller remedies. For these reasons, the unbiased analysis of merger litigation should account for the fact that firms simultaneously assess what combination of efficiency claims and remedy offers to opt for. Nevertheless, only a few papers allow for the possible interaction between the above two merger control instruments. Papers by Lagerlöf and Heidhues (2005), Motta and Vasconcelos (2005), and Neven and Röller (2005) model merger litigation with a special emphasis on efficiency claims, whereas Garrod and Lyons (2011) focus more on the analysis of remedy offers in litigation. Cosnita and Tropeano (2009) is an example where both efficiency claims and remedy offers exist simultaneously, and interaction between the two leads to the finding that efficient mergers value their assets more highly and are therefore less willing to divest them.1Bougette (2010), who analyses the effectiveness of remedies, also found that cost savings reduce the scope of remedy offers. This paper is an attempt to model merger litigation empirically by looking at how firms design their litigation strategy, of which efficiency claims and remedy offers both form part. Its novelty lies not only in empirically modelling the system of decisions that firms face in merger litigation but in using data from company reports on the merger-generated synergy expectations signalled to shareholders. This allows the direct empirical testing of some of the assumptions and findings from previous works. Synergies communicated to shareholders are also used as a proxy for cost of delay in order to distinguish cases where cost of delay dominates divestiture costs, and to test how it impacts merging parties' willingness to find an early settlement. The focus of analysis is on European Community mergers but the findings of this paper should bear relevance to all jurisdictions that place both remedy offers and efficiency defence at the merging parties' discretion.2 Although CAs should take both the benefits and the harms of mergers into account, this paper finds that the EC fails to extract information on potential benefits from the merging firms. Firms report some evidence on the synergies that their merger is expected to generate through integration but this evidence is not necessarily revealed to the Commission. This calls into question the assumptions used in Motta and Vasconcelos (2005), Neven and Röller (2005), and CT, i.e. that mergers with efficiency evidence in hand always have the incentive to reveal this evidence. Rather, this is more likely to depend on the experience of the legal advisors in the case. Evidence is presented that EU law firms with more experience in merger litigation are less likely to advise on making efficiency claims. This creates a situation where some mergers with relevant evidence may decide to keep quiet about it, potentially for reasons discussed in LH.3 At the same time, other mergers that have no efficiency-related evidence may try to bluff and make efficiency claims. Both CT and Bougette (2010) claim that high cost savings reduce the size of remedy offers, because the cost of divestiture increases for more efficient mergers. Although this paper only makes inferences on the size of divestitures relative to the level required by the CA, evidence is presented that firms that reported high efficiencies to shareholders only exhibit reluctance to offer relatively large upfront remedies when they made efficiency claims to the CA. Firms become more eager to find an early settlement when they choose not to apply for efficiency defence, and this effect becomes stronger the more efficiencies they signalled to shareholders. One possible explanation for this could be that this paper allows cost of delay to dominate the cost of divestiture in some cases. Given the higher saving expectations, parties to these mergers are expected to be more delay-averse (higher cost of delay) and are therefore likely to be offering overly large remedies to gain early approval, as proposed by GL. Finally, evidence is provided that mergers with higher efficiency expectations are willing to reach early settlement by making larger and quicker remedy offers, except when they had made efficiency claims to the Commission. This implies that firms may have an expectation that the CA tailors remedies to take the total effect of mergers (including the claimed efficiency gains) into account, the importance of which has been highlighted by Röller and de la Mano (2006). The paper is structured as follows. Section 2 presents the motivation and the economic framework of the paper, based on preliminarily observed data, the characteristics of the EC merger control regime, and the priors brought from theoretical papers. Section 3 introduces the data and the key variables. Section 4 discusses the econometrics used in the paper, including a discussion of the exogeneity of these variables and potential treatment effect issues. Finally, Section 5 presents a set of estimates and their economic interpretation is discussed. The paper concludes with a discussion of the validity of the assumptions made.

The paper gave an empirical analysis of merging firms' litigation strategy. It was shown that the current EC merger control regime is incapable of extracting information from firms on their efficiency expectations and the experience of the legal advisor in the case plays an important role in this. Firms that expect their merger to generate efficiency gains are more likely to make upfront remedy offers. Efficiency claims (valid or false) made to the Commission reduce the size of the remedy offer, however false efficiency claims may be distinguished by looking at the timing of the remedy offer. Cost of delay plays a central role in designing firms' litigation strategy, especially when these costs exceed the cost of the remedy. Mergers with high cost of delay refrain from efficiency defence and offer early and large first remedies. Some of the findings of this paper may have implications beyond merger control. For example, the importance of the experience of the legal advisor in any type of litigation bargaining setting should deserve more academic attention as it is likely to play an important role. Similarly, the seemingly different attitude of US and EU law firms would also be worth further exploring. The paper provides supporting evidence to general bargaining literature that settlement is reached early if the cost of delay is sufficiently high. An open question for future research in a somewhat broader context is how much of these findings are due to managerial opportunism, especially given the high level of information asymmetry on issues such as the efficiency impact of a merger, or the true value of a divested asset. A few points are also raised for the policymaker. Firstly, given the potential for rent seeking that results in making false efficiency claims, it should be considered whether a procedural fine should be introduced for sanctioning outright false efficiency-evidence. Secondly, as a result of the current practice even efficient firms refrain from making efficiency claims and they offer remedies instead, leading to potential type I errors in EC merger control. And finally, better incentives to reveal efficiency-evidence should be introduced, for example by requiring the Commission to make sure that remedies are tailored to take efficiency-gains into account. In a more general context, in any regulatory situation where firms have the discretion to withhold evidence and make settlement offers, regulators need better tools for extracting information that is important for deciding on the welfare implications of a behaviour.