Résumé
This paper studies the bargaining over merger asset divestiture in the shadow of appeal litigation. We provide theoretical foundations for a recurrent empirical finding, namely that the opportunity cost born by the merging firms due to merger control has direct consequences for the remedy divestiture agreement. Increased severity of the appeal court improves the imperfect merger screening implemented by the agency through remedy negotiation, which possibly argues in favor of a judicial complement to the “regulatory” merger policy enforcement. But the main recommendation for agencies is to devise tools to better deal with the asymmetric information that limits the effectiveness of their merger policy enforcement.
•We study the merger divestiture negotiation in the shadow of appeal litigation.•The conditional approval results from a settlement game with asymmetric information.•The parties' resulting opportunity cost affects the remedy divestiture agreement.•Increased appeal severity improves the agency's imperfect merger screening.•This may call for a judicial complement to the regulatory merger policy enforcement.