Mergers and acquisitions in european and north american energy markets: empirical analysis of legal and ownership unbundling

bogner, stefan ; gasser, stephan m. ; rammerstorfer, margarethe;

Competition and antitrust law aims to prevent companies from engaging in anticompetitive behavior and to promote and protect market competition. In this
context, mergers and acquisitions (M&As) are under particular scrutiny, since they
are often assumed to be motivated by possible market power increases, thus
adversely affecting market efficiency. With a view to recent efforts within the
European Union to increase the effectiveness of competition law in the energy
sector (that is, legal and ownership unbundling as policy tools geared towards
forcing corporations into demerging transactions), an event study approach is
applied in this article to evaluate the market response to the announcement of
mergers and acquisitions in EU and U.S. energy markets and to determine whether
or not the hypothesis that M&As result in increased market power of the joined
companies actually holds true. Findings indicate that increases in market power are
not the main motive for energy market M&As. The results thus oppose the general
adequacy of legal and ownership unbundling as veritable competition law instruments
against market imperfections and failures, but indicate that unbundling can
indeed be a viable policy solution if implemented on a case-by-case basis.