Chapter 5: Mergers and Competition Policy in Europe

Lars Calmfors, Giancarlo Corsetti, Seppo Honkapohja, Gilles Saint-Paul, Hans-Werner Sinn, John Kay, Jan-Egbert Sturm and Xavier Vives

EEAG Report on the European Economy, 2006, 101-116

Abstract: Merger activity is gathering pace in Europe. The policy challenge lies in how to achieve cost-cutting increases in firm size from restructuring in the face of globalisation, while simultaneously maintaining sufficient competition. This requires that obstacles to hostile and cross-border mergers be removed, while care is taken not to promote European champions that end up being effectively protected from bankruptcy. Competition policy should not enforce low concentration in natural oligopoly industries, where only a small number of firms can survive. The 2004 reform of the merger control procedures in the EU was a step in the right direction. But further checks and balances should be introduced, and the lobbying influences by national governments and large firms minimised. One possibility would be to create an administrative panel, independent of prosecutors and investigators, that gives a public recommendation to the Commission or even takes final decisions. Failing this, a debate should be opened about the need for an independent European competition agency similar to the US Federal Trade Commission.

Date: 2006
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