Horizontal mergers and efficiencies; theory and anti trust practice

Horizontal mergers can be challenged by anti trust authorities under both the US and EU Horizontal Merger Guidelines. More horizontal mergers are unconditionally approved in the US than in the EU. EU merger policy toughened after 1998 but became more in line with US practices after 2004. Differences in merger policies between the US and the EU can be explained by a greater scope of the efficiency argument in the US. The paper argues that firms only want to merge in oligopoly, if they expect to realize substantial merger specific efficiency gains, which counterbalances the price increasing effect of merger.