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Abstract

In the wake of the Alstom restructuring, the French government indicated that current merger control rules do not allow for the development of European champions and called for a change in the rules. This paper argues that such a move may be not be advisable but that enforcement of the current rules should be improved, in particular regarding the assessment of efficiencies and the delineation of the wider public policy considerations that Member States can appeal to in exercising their own control. With respect to efficiencies, the Commission’s practice exacerbates the inherent bias of its consumer harm standard against the development of more efficient firms. The identification of transactions that are likely to harm consumers requires the evaluation of the magnitude and likelihood of efficiencies with respect to a benchmark that is case specific. However, a review of the Commission practice suggests (i) that it has failed to develop a constructive standard for the evaluation of efficiencies, (ii) that the standard of proof that it applies to efficiencies is high and misguided with respect to the extent of pass-through, (ii) that the magnitude of efficiencies is often not assessed in relation to the potential harm and (iii) that a discrete threshold is often applied with respect to the likelihood of efficiencies. An improvement in the assessment of efficiencies along these dimensions would improve enforcement under the existing standard, making it less inimical to the development of efficient firms and would thereby also enhance its political acceptability in relation to the recurring debates on national champions. With respect to the additional oversight over transactions that Member States can exercise, the paper finds that the operation of the merger control framework would be improved if the Commission would pro-actively clarify the wider public policy considerations that can be brought to bear on the transactions under Art 21(4) and impose some transparency requirements on member states that elect to appeal to these public policy grounds to impose additional remedies. The paper also offers some guiding principles for the delineation of these policy grounds.

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