In January 2004, the European Commission (EC) published new Guidelines on the analysis of horizontal mergers and an important revision to Article 2 of the EC Merger Regulation. Under the new EC Merger Regulation, the Commission articulated a new test under which it would review the competitive implications of proposed mergers and acquisitions.

Under the new substantive test, a transaction would be prohibited if it “would significantly impede effective competition, in the common market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position.” By focusing on how a proposed merger may significantly impede effective competition, the new test recognizes the potential that a merger may allow the merging firms to raise prices unilaterally. The revised EC Merger Regulation therefore bridges a perceived gap in the scope of the “dominance test,” which was the governing standard in the past. The new test also moved merger analysis in Europe closer to that in the US.

Whether the merging parties will be in a position to increase prices postmerger raises questions that can often only be evaluated with an empirical analysis. Thus, with the change in the EC Merger Regulation, it is likely that the nature of the economic analysis will change for many proposed transactions. If European merger enforcement will involve more empirical economics, what kinds of statistical and quantitative analyses can we expect to see in the future? The lessons from several recent EC merger investigations point the way, and in this chapter from Economics of Antitrust: New Issues, Questions, and Insights, the authors desribe case studies that illustrate how the Commission has been refining and extending its analysis of unilateral effects.