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Deterrence in EU merger policy

Clougherty, Joseph A., Duso, Tomaso, Seldeslachts, Jo, (2016), “Deterrence in EU merger policy”, VoxEU, 9 April

Though there is a consensus that competition is welfare enhancing, it is less clear whether competition policy effectively stimulates competition. This column presents new findings on the deterrence effects of merger policy in the EU. The evidence shows that initial phase remedies uniquely involve deterrence in the European context, while other policy actions do not. Secondary phase remedies, however, do not lead to deterrence effects. The enforcement of EU competition rules is essential in supporting the integration of European markets and the enhancement of economic growth in the EU. Indeed, EU member states have granted substantial authority to the European Commission in the field of competition. The established wisdom among economists and policymakers is that competition matters when it comes to economic efficiency and innovation. Furthermore, by producing consumer savings through lower prices and higher quality products, competition can stimulate demand, lower inflation, and lead to concrete improvements in the purchasing power of consumers. Finally, competition also reduces price levels in the wholesale and intermediary markets – markets that fundamentally affect other markets and the greater economy.

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