Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Monday, May 23, 2011

Early Settlements and Errors in Merger Control

Posted by D. Daniel Sokol

Luke Garrod and Bruce Lyons (University of East Anglia) address Early Settlements and Errors in Merger Control.

ABSTRACT: We develop a model of remedy offers made to an expert agency which has powers to act before any harm is experienced and is required to decide on the basis of tangible evidence. The model provides a relationship between the factors determining the probability of delay and the type of error in early settlements (i.e. insufficient versus excessive remedy). We apply the model using data from European Commission merger settlements. Our econometric analysis confirms the importance of delay costs and the uncertainty associated with the agency’s findings. Our results are also consistent with the prediction that delay is not systematically related to the inherent competitive harm of the merger proposal. We use our results to identify specific cases of insufficient remedy in early settlements.

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