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Lear Competition Note – “Optimal Pre-Merger Notification Thresholds: An Economic Approach”

Every year, the number of mergers taking place across countries is extremely high. In order to guarantee an effective and efficient merger review regime, an economic approach in line with international best practices should be adopted in setting pre-merger notification thresholds for different countries.
This note aims to shed some light on this issue in a practical way. First, by elaborating a very simple theoretical framework aimed at identifying an “optimal rule”, i.e. the thresholds that minimise the sum of the expected costs of type I and type II errors. Second, by complementing the analysis with a benchmarking exercise, in order to get more country-specific optimal thresholds.
If efficiency is the main or exclusive goal of antitrust rules, the error cost minimisation mechanism that we adopt in our framework can and should also be applied to merger control and to procedural rules.
This note aims to provide some initial thoughts to enrich the scant literature on this issue.

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Date: 9 January 2015
Tag(s): Competition Economics, Mergers