In industry after merger eg reduced number firms in

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Unformatted text preview: rms more symmetric In EU terms: „joint dominance“ GO BACK TO MATERIAL ON GO COLLUSION TO EVALUATE THIS COLLUSION 23 23 Merger Remedies Merger Merger approval only conditional on certain remedies certain Structural remedies modify modify allocation of property rights divesture of ongoing business divesture Behavioral remedies set set constraints, e.g. do not abuse property rights rights 24 24 Divestures Merger: Merger: overlaps in geographic areas and/or lines of business and/or Overall, Merger OK, but for some markets Overall, anti-competitive effects may occur anti-competitive Selected divestment of assets can solve Selected problem, as assets van be purchased by new firm or existing competitor new 25 25 Divestures Problems: Merging Merging Parties have incentive to make sure that buyer will not be competitive sure e.g. transfer valuable personnel to other unit dispose certain brands or patents not maintain plant or shops properly select buyer Competition authority has to control this 26 26 Divestures Again, Again, asymmetric information problems, especially if buyer is not yet in industry especially If buyer and seller are subject to other business If relationship, e.g. in upstream market, remedy is unlikely to restore competition unlikely Happens It frequently in practice! is not clear which buyer gets the assets consider consider auction: one buyer that intends to compete bids for the assets, but another one intends to collude with merged company latter may overstate bid for assets as expected profits will be higher due to later collusion collusion 27 27 Divestures Again: Again: Divesture may increase symmetrie among firms risk of collusion Especially if they create multi-market Especially contacts contacts Conclusion: Structural remedies should Conclusion: pass the same test as the merger itself. Only if both tests are satisfied: allow merger. merger. 28 28 Behavioral remedies E.G. Astra / Zeneca Merger Both had a certain drug in the Swedish and Both Norwegian market that were...
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This note was uploaded on 01/22/2014 for the course ECON D0T32A taught by Professor Czarnitzkidirk during the Spring '13 term at Katholieke Universiteit Leuven.

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