Supranational Agency: A Solution for Conflict in International Mergers?

Abstract

Conflict between national antitrust or competition laws is likely to increase with the increase in global integration. In this paper we develop a two-country, three-firm model to analyze the possibilities of conflict between national antitrust authorities, using the welfare criteria. We show that if countries maximize their national welfare there is a likelihood of conflict resulting at times in obstruction of welfare-enhancing mergers. We show that shifting to either a global welfare or consumer surplus standard can resolve conflicts but may not always lead to an efficient outcome. To achieve efficiency, transfer payments are required. We argue that there is a scope for institutions like WTO to assume the role of supranational authority in cross border merger cases.

Keywords: Conflict, Cross border merger, Efficiency, Welfare, Standardization

JEL Classification: D74, F51, L4