The European Commission’s merger-review power has been a subject of controversy among lawmakers and commentators for more than two decades. One reason for this is that the Commission has sometimes used its extensive competition authority to prohibit high-profile mergers involving non-EU firms—even where those same acquisitions are approved by other competition authorities. The Commission’s 2001 decision to block the $42 billion acquisition of Honeywell by General Electric—a merger approved by the US Department of Justice—is perhaps the most well-known of these cases, an anecdote that looms large in competition-law lore. But GE/Honeywell does not stand alone. In the name of competition law, the Commission has repeatedly blocked or forced significant restructuring of mergers involving a wide range of well-known American firms, including Boeing, MCI WorldCom, Time Warner and UPS.
These high-profile interventions have raised concerns that the Commission is using its merger-review power to advance protectionist industrial policy rather than competition. In the wake of GE/Honeywell itself, for example, US Treasury Secretary Paul O’Neill called the Commission’s decision ‘off the wall’, describing the Commission as ‘autocratic’, and the Department of Justice’s chief antitrust enforcement official noted the Commission’s ‘divergence’ from the principle that ‘the antitrust laws protect competition, not competitors’. Members of the US Congress expressly accused the Commission of ‘using its merger-review process as a tool to protect and promote European industry at the expense of US competitors’. Today, the primary concern is the Commission’s mounting antitrust and State aid investigations of US high-tech companies, including Google, Qualcomm, and Apple, which critics say reflect the EU’s attempt to offset US technological edge and tilt the market in favor of their weaker European rivals.
The notion that the Commission’s merger-review authority is used to protect European firms from foreign competition should not be taken lightly. For one thing, the economic stakes are high: in Europe alone, the value of mergers and acquisitions in 2014 was about $900 billion. For another, the increasingly international focus of merger activity makes clear that only rarely—if ever—will a significant merger escape the Commission’s antitrust mandate. Yet the idea that a critical gatekeeper for global merger activity is using its authority to protect favored firms rests largely on a few famous anecdotes. The Commission’s decision-making has not been subjected to the kind of systematic empirical analysis that could rigorously test those intuitions.
In our article, we introduce a unique dataset that permits us to provide the first careful examination of the determinants of the Commission’s merger review policy. While previous analysis of the Commission’s decisions has relied on small, hand-drawn samples ranging from 96 to 245 cases, our novel data offer the unique opportunity to examine the Commission’s enforcement record across more than 25 years and over 5,000 cases.
We identify evidence that, contrary to policymakers’ and practitioners’ intuitions, the Commission has not intervened more frequently, or more extensively, in transactions involving a non-EU- or American-based firm’s acquisition of a European target. If anything, our results suggests that the Commission is less likely to challenge transactions involving non-EU acquirers. Of course, it may well be that protectionism plays an occasional role in European merger-review cases. We show, however, that the evidence does not support the claim that any such bias systematically affects merger-enforcement outcomes in the European Commission. Our finding challenges the conventional wisdom that portrays the European Commission as a protectionist institution that deploys its vast merger control powers as a tool for industrial policy.
Anu Bradford is the Henry L. Moses Professor of Law and International Organization at Columbia University.
Robert J. Jackson is Professor of Law at NYU School of Law.
Jonathon Zytnick is a PhD candidate at the Columbia Faculty in Economics.