Competitors in merger control: Shall they be merely heard or also listened to?

Abstract

There are legal grounds to hear competitors in merger control proceedings, and competitor involvement has gained significance. To what extent this is economically sensible is the focus of our game-theoretic analysis. The competition authority applies some welfare standard while the competitor cares about its own profit. In expectation, there is neither a pure conflict nor a complete alignment of interest. We distinguish hard and soft information and ask whether hearing the competitor might convey valuable but non-verifiable information to the authority. We identify a case where, based on the authority’s verifiable information, the authority’s decision is improved by following the competitor’s selfish but non-verifiable communication. We argue that the practical relevance of this constellation is very limited, especially so under a consumer welfare standard. Thus, non-verifiable information should mostly be ignored. Complementary to our analysis, we provide empirical data of competitor involvement in EU merger cases and give an overview of the legal discussion in the EU and US.