An Economic Perspective on the Jurisdictional Reform of the European Merger Control System

The jurisdictional elements of the comprehensive 2004 reform of EU merger control are worth being analysed against the background of economic theory. Competence allocation and delimitation represent important factors for the workability of multilevel merger control regimes. The economics of federalism offer an analytical framework that can be adopted in a modified version in order to assess competence allocation regimes in competition policy. According to these theoretical insights, a given competence allocation and delimitation regime can be evaluated in regard to four criteria: internalisation of externalities, cost efficiency (the one-stop-shop principle), preference orientation, and adaptability. The "old" competence allocation and delimitation regime of EU merger control consisted of two elements: turnover thresholds and post-notification referrals. Analysis along the lines of the economics of federalism reveals considerable deficiencies of the "old" regime. Thus, the results of the theoretical analysis are compatible to the dissatisfying empirical experience, which represented a major motivation for launching the reform process. However, the actual reform eventually left the turnover thresholds untouched. The main element of the jurisdictional reform was the introduction of pre-notification referrals and the addition of institutionalised network cooperation. Against the background of the economics of federalism, one must conclude that the reform failed to significantly improve competence allocation in EU merger control. The internalisation of externalities, preference orientation, and adaptability have not been improved. Regarding the cost efficiency criterion, early, anecdotic and provisional empirical evidence hints towards minor improvements of the one-stop-shop principle, albeit merely in its centralising variant. This is contradicted by an increased opaqueness of the overall system due to the higher degree of complexity of the referral regime. The economic analysis in this paper shows that the underlying problems of jurisdictional issues of the multilevel EU Merger Control System have yet to be sufficiently solved. Therefore, this article predicts that jurisdictional issues will remain on the reform agenda