An empirical assessment of the 2004 EU merger policy reform

Based on a database of 326 merger cases scrutinized by the European Commission between 1990 and 2007, we evaluate the economic impact of the change in European merger legislation in 2004. We first propose a general framework to assess merger policy effectiveness, which is based on standard oligopoly theory and makes use of stock market reactions as an external assessment of the merger and the merger control decisions. We then focus on four different dimensions of effectiveness: 1) legal certainty; 2) frequency and determinants of type I and type II errors; 3) rent-reversion achieved by different merger policy tools; and 4) deterrence of anti-competitive mergers. To infer the economic impact of the merger policy reform, we compare the results of our four tests before and after its introduction. Our results suggest that the policy reform seems to have been only a modest improvement of European merger policy.