Takeover Directive

Abstract: IN RECENT years many of the traditional economic justifications of our antitrust laws have been seriously questioned. A new sophistication has developed, and economic activities frequently held illegal by the courts are now thought by many to be consistent with our antitrust goals. The rules against tie-ins, vertical mergers, predatory competition, among others, have to a greater or lesser degree had their theoretical foundations considerably weakened. Recently even cartels, the most venerable victim of American antitrust laws, have found their near champion.2 One practice, however, remains generally condemned in both the economic literature and the most recent Supreme Court rulings. Mergers among competitors would seem to have no important saving grace. The position has gained considerable legal currency that any merger between competing firms is at least suspect and perhaps per se illegal. The latter result seems especially likely when one of the combining firms already occupies a substantial position in the relevant market. Antitrust problems in the merger field seem more and more to be confined to discussions of relevant product and geographic markets and perhaps to the issue of quantitative substantiality.3 Presumably there is still a so-called failing-company defense to an illegal merger charge. The announced justification for this doctrine was that, if indeed the merged company was failing, then it was not actually a competitor in the industry.4 But there are strong suggestions that even that defense may be unavailable when a large corporation is making the acquisition, or when there is any chance of absorption by a non-competing firm, or when the acquired company has not "failed" enough.5

Abstract: In the past, economic integration in Europe was largely compatible with the preservation of different national varieties of capitalism. While product market integration intensified competition, member states could build on and foster their respective comparative advantage. Today, this no longer unequivocally holds true. This article contends that a new, ‘post-Ricardian’ phase of European integration has emerged in which the Commission's and the European Court of Justice's (ECJ's) attempts to promote economic integration systematically challenge the institutions of organised capitalism. It demonstrates this by discussing recent disputes over the Services Directive, the Takeover Directive, and company law. In the current phase of European integration, the Commission's and the ECJ's liberalisation attempts either transform the institutional foundations on which some of the member states' economic systems rely or they create political resistance to an extent that challenges the viability of the European project.

Abstract: The integration of national markets for corporate control continues to lag behind the removal of barriers to trade in goods and services. To what extent does the protracted political battle over legal harmonization in this area reflect a clash of interests between liberal and coordinated national varieties of capitalism? To find out, we map the distribution of political support for liberal takeover rules within and across countries by analyzing a roll-call vote on the takeover directive in the European Parliament in July 2001. Our data show that, in line with the clash-of-capitalisms hypothesis, nationality did trump party group position on a left–right axis as a predictor of delegates' attitudes toward takeover regulation. Given the increasing interference of European Union-level legislative initiatives with the regulatory pillars of coordinated market economies, and the accession of 10 new Eastern European member states, we expect the salience of the clash-of-capitalisms cleavage to increase in the near future.

Abstract: To foster corporate restructuring and capital market integration, the European Commission has repeatedly attempted to introduce Europe-wide takeover regulation, but has encountered strong resistance. We trace the sources of this resistance to differences in corporate governance arrangements across member states and outline the economic effects of takeover regulation, focusing in particular on possible provisions of particular relevance to the European debate. Regulation may stipulate that the same price be offered to all shareholders (a ‘mandatory bid’ rule) and/or that differentiation of voting-rights be voided when a bidder acquires a large enough portion of a firm’s shares (a ‘break-through’ rule). The impact of these and other rules depends on the existing structure of corporate ownership and control, which is very heterogeneous in Europe. And while a break-through rule promotes takeovers, a mandatory bid rule tends to prevent them. Hence, the two rules would tend to offset each other if introduced together, and introducing a strict mandatory bid rule alone would slow down corporate restructuring. We argue that hostile takeovers are a rather blunt instrument for achieving desirable contestability of control, and their regulation is only one of many corporate governance mechanisms to be honed in order to promote corporate restructuring in Europe.