Abstract

We present the economic analysis of mergers and its policy implications in a non-technical way. We also review the main features of the EC merger policy and suggest some modifications which would help to bring it in line with economic thinking. More specifically, we argue that the EC merger policy has two main distortions. The first one is that it prohibits only mergers which create or reinforce a dominant position, whereas economic analysis suggests that there exist mergers which are detrimental to welfare even though they do not raise issues of dominance. The second distortion is that the EC merger policy does not recognise the role played by cost savings which might give rise to overall beneficial effects of mergers.