Are merger remedies effective and proportional?

More and more merger proposals are cleared under the condition that the merging parties sell some of their assets to a competitor. What do competition authorities exactly get from this? How does it affect the incentives for firms to propose mergers in the first place? This issue was the topic of a recent TILEC seminar. Helder Vasconcelos (University of Porto) presented a model of merger control with conditional clearance. Although structural remedies create new merger opportunities to firms, when insisting on them to clear a merger the antitrust authority tends to over-fix the competition problem (i.e., to go beyond the return to the level of competition that existed prior to the transaction), which may discourage firms to propose more efficient mergers. Alessandro Tajana (Johnson & Johnson and TILEC) analyzed the evolving practice of the European Commission in this respect. According to him, the available evidence suggests that it has a clear preference for the sale of whole business units over other possible remedies. Along the way, the proportionality requirement present in the relevant Council regulation has been lost. Thus, a risk exists that the Commission be tempted to use mergers as an opportunity to redistribute capital among firms in the industry.