Mergers and national champions

Abstract

The suspicion that national governments were in various forms promoting or defending domestic national champions (or discouraging foreign ones) arose in a long list of recent merger cases. This paper provides an analysis of the determinants of merger policy in international markets. We discuss two approaches. First, we examine the strategic policy arguments that may lie behind 'national champions' positions on mergers in an international economy. Second, we study a political economy approach to merger policy, where we move beyond the assumption that governments are pure welfare-maximizers and consider the effects of lobbying by domestic firms. We argue that standard 'strategic trade policy' arguments are probably not the most useful in understanding governments' attitudes towards mergers. Rather, a combination of 'economic' and 'political' motives helps explaining merger policy in international markets.