Do Cartel Breakdowns Induce Mergers? Evidence from EC Cartel Cases

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Series Details Volume 9, Number 2, Pages 407-429
Publication Date May 2013
ISSN 1744-1056
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Introduction:

"Cartel agreements between firms typically aim at reducing competition and increasing joint profits. Due to the fact that such agreements regularly cause substantial economic harm in the form of, for example, elevated prices and reduced innovation activities, cartels are a major infringement of competition laws in most countries around the world. After the breakdown of cartels,anecdotal evidence often points towards an increased merger activity in the respective industries, thereby raising the question whether mergers must be considered as a potential “second-best” alternative to cartels."

"The article is structured as follows. Section B sheds light on the interaction between cartelisation and merger activity. In addition to a general characterisation of cartels and mergers, we particularly study merger activity before and after a cartel breakdown. Section C presents our empirical analysis. Subsequent to the detailed description of the construction of the data set, we subdivide the reporting our empirical results into two subsections. While the first subsection concentrates on all mergers after cartel breakdowns, the second redoes the analysis for the subset of horizontal mergers. Section D concludes the article with a review of the key insights and the derivation of several important policy implications."
Source Link https://doi.org/10.5235/17441056.9.2.407
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