Merger remedies: key recent developments in the CMA's practice

The Competition and Markets Authority (CMA), in common with other competition authorities, strongly favours structural remedies (i.e. business or asset disposals) as the most effective means to restore competition eliminated by a merger. Behavioural remedies (i.e., measures that seek to regulate the ongoing behaviour of the merger parties) are not generally favoured by the CMA. In considering the effectiveness of proposed remedies, the recent judgment in Ecolab v. CMA demonstrates that the CMA is afforded a wide margin of appreciation. That same margin of discretion was notably exercised by the CMA in the Bauer Media Group Inquiry where, contrary to conventional practice, it accepted a complex behavioural remedy in preference to structural alternatives. This article explores these two cases in greater detail and identifies some key factors that inform the CMA's conduct in relation to merger remedies.

Evaluating Mergers and Divestitures: A Casino Case Study

Despite frequent use in practice, merger remedies receive little attention in the economics literature. We analyze the 2013 merger of two casino operators and the subsequent divestiture of one St. Louis casino. Using public data from the Missouri Gaming Commission, we employ a difference-in-difference framework with other Missouri casinos as the control group to estimate separate effects of the merger and divestiture on each St. Louis casino. Results indicate the merged firm benefited from efficiencies, resulting in lower prices and higher quantity; however, the divested casino performed worse than before the merger. Synthetic control estimates confirm these results. This study raises questions about whether to assess remedies by the performance of the divested asset or the consumer welfare of the entire merger. It also raises questions regarding remedy endogeneity: do firms face incentives to offer declining assets? Both have applicability beyond this case, supporting the need for further research. (JEL L1, L4)

Procedural versus competition perspectives on recent CCPC merger remedies: the Berendsen (Elis)/Kings Laundry transaction

In a 2019 article in the Competition Law Journal Andrews and Fitzgerald argue that the decisional practice of the Competition and Consumer Protection Commission (CCPC), Ireland's competition agency, in clearing three Phase II mergers, demonstrates an ‘openness to resolving identified competition issues via remedy packages even in highly complex [merger] cases’. However, from a competition economics perspective, based on an examination of one these three cases, the Berendsen (Elis)/Kings Laundry transaction, the remedy package does not mitigate the competition concerns identified by the CCPC. Indeed, the remedy is likely to exacerbate these concerns. The merger should have been prohibited. This article suggests two ways in which the CCPC's merger procedures can be revised so as to ensure greater congruency between the procedural and competition economics perspectives.

New insights on Irish Phase 2 procedures and CCPC views on remedies

Three Phase 2 merger reviews recently completed by Ireland's competition authority, the Competition and Consumer Protection Commission (‘CCPC’) shed some light on its Phase 2 merger review procedures. All three mergers were cleared subject to conditions and the remedies involved (in one case a structural remedy involving a business divestment, in another a quasi-structural remedy involving customer contract sales, and in the third case purely behavioural ring-fencing commitments) clarify the CCPC's practice on merger remedies. This article reviews the three determinations primarily from a procedural perspective, but also describes the remedies accepted by the CCPC in each case.

The economics of merger appraisal: analysis of best practices

The article briefly outlines key economic principles that are used for merger appraisal in Europe and the US. We consider three most typical cases: horizontal, vertical and conglomerate mergers. We explain the main positive and negative effects that typically arise in each case. We point that the analysis of structural factors (levels of industry concentration and market shares) and barriers to entry can serve only as a starting point of the merger appraisal process. Other indicators such as closeness of competition, countervailing buyer power and customer switching, counter-reactions of rivals, levels of profitability, cost savings are far more important for the analysis of merger effects on consumers and competition. In addition, we describe general economic principles with regards to merger remedies.

Strict(er) Scrutiny: The Impact of Failed Divestitures on U.S. Merger Remedies

Antitrust review of mergers and merger remedies, in particular, have been the topic of much recent conversation both in the legal world and popular political discourse. A recent string of failed divestitures has driven the U.S. antitrust agencies to analyze proposed remedies and proposed divestiture buyers with increasing scrutiny as they seek to avoid similar outcomes. This article details the history of recent divestiture failures and explores how the agencies have adapted their remedy vetting process in response through longer investigations, enhanced focus on particular aspects of buyers’ qualifications, and an increased insistence on up-front buyers, as well as the agencies’ success in persuading courts that proposed divestitures and/or buyers were inadequate in a series of recent litigated merger challenges. Against this backdrop, this article offers practical guidance for merger parties and would-be buyers to navigate the approval process amid the agencies’ heightened sensitivities to the qualifications of divestiture buyers. Finally, it suggests that there is little empirical support for the notion that the most concrete, observable agency responses will reduce the risk of divestiture failures in the future.