The above case histories are illustrative of what has been called the “increasing extraterritorial intrusion of European Union authority into U.S. business mergers and competition practices” (which is the title of a paper by George, Dymally, and Lacey 2004). Literature on the nature of the transatlantic antitrust and merger regulatory environment clearly reveals the existence of a widespread perception that the E.C. is regarded as a stricter regulator than its U.S. counterparts. Even those who seek to prove the opposite case acknowledge this prevailing point-of-view ( a 2002 EU publication titled Trends in EU Merger Intervention begins its Summary of Findings: “Notwithstanding recent criticism, the European Commission does not, in fact, appear to have become more interventionist when assessing mergers…” Also see Merger Control: More Stringent in Europe than in the United States by Leveque 2007).
It might seem that there should be little debate on which of the two regulators is “stricter”; a simple comparison of merger regulatory activity should provide the answer. However, because the merger review processes vary from one side of the Atlantic to the other, this is not as straightforward a task as one might imagine. Both merger review processes begin with notification of the proposed merger by the parties involved, but from there diverge.
Once a notice is filed, U.S. enforcement agencies (the DOJ and FTC) have one month to review the matter. If during this initial waiting period any concerns are not resolved, one authority or the other issues a detailed request for more information. This usually results in delay of the merger until 30 days after the merging parties have provided any new information. From there, the deadline may be extended by agreement with the merging parties. To block a merger transaction entirely, one authority or the other must obtain a court order. This rarely happens; most concerns are resolved through settlements.
The E.C. process is more complex. Upon notification of the proposed merger, the E.C. is obliged to make a preliminary evaluation within 25-35 working days (up to 49 days). This is known as the “phase 1” portion of the investigation. At the end of this period, the merger may be approved. If it is not, and preliminary findings raise “serious doubts as to its compatibility with the common market,” the E.U. generally begins a more thorough “phase 2” investigation. This extends the inquiry by 90-125 working days (up to about six months). At the end of the phase 2 investigation, the E.C. issues a formal report on the merger. At this point, if the E.C. believes the merger to be anticompetitive, it may be prohibited (although most proposed mergers are eventually allowed with some form of remedy or the other). In many cases, this lengthy review process and/or the requirements of the proposed remedy cause the parties initially intending to merge to reconsider and withdraw their application for merger.
Because of these non-parallel processes, scholars on the subject of transatlantic antitrust and merger regulation have devised a few different methods of comparing merger data from the authorities. In his paper Investigating Transatlantic Merger Policy, Florian Szucs analyzed 493 cases occurring in the period 1999-2007 and compared the outcomes of each case (allowed on the one hand or blocked/requiring remedy on the other) for both the E.C. and U.S. regulators (FTC and DOJ). He found that in this sample period, using his methodology, intervention or “action” on the part of the E.C. was 14% higher than on the part of the U.S. regulatory agencies.
In their paper Comparing Merger Policies: The European Union versus the United States, Bergman, Coate, Jakobsson and Ulrick model “the final enforcement decision with facts taken from either the formal EU decisions or the official US internal memoranda by the investigations.” The authors compare 278 cases, just over half as many as Szucs, which they believe to be best suited for direct comparison. Regarding their methodology, the authors state: “To collect the data, two students reviewed the published information and, when no published data were available, the confidential files, under the direction of the authors. At the FTC, the relevant information set was comprised of confidential memos written by the Commission’s attorneys and economists. These memos were reviewed by pairs of research assistants and the results checked for consistency by one of the authors. The details on the data collection process are presented in Appendix B.” Appendix B goes on to describe in more detail how the enforcement decisions of the E.U. and FTC are modeled using probit estimation.
Although the comparison of the two regimes by Bergman, et. al. is much more nuanced than Szucs’ investigation, it still ultimately reveals that “in sum, the results show that the US regime would be less strict than the EU both when facing the actual EU cases, as well as when facing a set of hypothetical cases of the same type of the EU.” (pp.43) The authors later state that “on average, the EU has a stricter dominance enforcement regime than the US, for most types of matters in the dataset” and that “had the EU faced the exact US cases, the EU would have implemented a stricter enforcement policy, for cases with combined market shares below 75 percent.” Still more research indicates that the level of EU anti-merger enforcement rose for most of the period from 1993-2001 (see EC Merger Policy after GE/Honeywell and Airtours by Cento Veljanovski, 2003).
Tellingly, it seems that no academics, stakeholders, or others have argued that the situation is the reverse; while some EU stakeholders and others (such as Leveque and Cliff Stevenson, Chief Economist of the EU Competition and Trade Group) have argued that the two regimes are only “marginally” different in their approaches to enforcement, no one to date has argued that the U.S. authorities are the stricter of the two regulators. It is also of note that where there are various examples of E.C. intervention in proposed mergers between companies not based in the E.U. (including Boeing/MDC, GE/Honeywell, and Oracle/Sun) and numerous examples of E.C. antitrust actions against non-European firms (Microsoft, Airtours, Google), the reverse is apparently not the case. To date we have found no cases of U.S. regulatory authority action against any merger of two non-U.S. firms. Antitrust actions against non-U.S. firms may well exist, but do not appear to rise to the prevalence or notoriety of E.C. antitrust action against non-European businesses at this point in our research.
If we consider the matter of which is the stricter regulatory authority to be resolved as conclusively as can be ascertained from non-parallel data, case histories, and anecdotal evidence, and consider the lack of any evidence to the contrary, many important questions yet remain. Given that the E.C. is the stricter of the two regulators who now seek ever-greater “cooperation and coordination”,
How has the overall level of mergers been affected over time?
How many regulatory actions involve “domestic” versus “foreign” firms for each agency? [A question which should reveal whether a case for bias or rent-seeking in merger regulation might be argued]
On what points do the two authorities most often tend to compromise with each other, if at all?
Are the two separate but presumably “converging” processes really compatible-- do they retain internal consistency in the face of cooperation with an outside regulator whose philosophy stems from a different legal philosophy?
How does convergence affect the stated aims of each agency?
This thesis seeks to answer as many of the above questions as proves possible given the constraints of the data and accepted models.
Since the 1991 Bilateral Agreement first codified a doctrine now commonly referred to as "cooperation and coordination" between the European Commission and its U.S. counterparts (chiefly the Federal Trade Commission and the Department of Justice), several cases have highlighted the effects of this doctrine on economicy activity as well as potential effects on the sovereignty of the U.S. and E.U. The above case summaries give a sense of some of these effects and implications.
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