Are American lawyers more honest than their European counterparts?

Surely it is by no means powerful or conclusive evidence but I came across a very interesting finding, which suggests that in representing mergers in European Commission cases US law firms seem to be more genuine about efficiency defence claims than their EU counterparts.

I stumbled upon this whilst analysing business annual and quarterly reports around the time these businesses were involved in a merger authorisation process before the European Commission. I was curious to see how much cost-savings firms report to shareholders about their planned mergers. I found that in around half of the cases no such savings are reported pre-merger and for the other half of the cases the expected magnitude of these synergies shows a rather high variance (more detail about this data can be found here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1532758). Among other things I looked at whether there is any relationship between these synergy claims made to shareholders, and the claims that the same merging firms report to the European Commission (efficiency defence is the commonly used term for claims that merging parties make on merger-generated efficiencies that outweigh the anticompetitive effects). The following table shows whether a claim made to the shareholder is also reported to the EC – broken down to mergers represented by EU and US law firms.

The bottom half of the table is the interesting part. In cases where merging firms received legal advice from US law firms, efficiency claims to the Commission are nearly only made if similar claims are also made to shareholders. In the case of EU legal advice efficiency defence seems more likely if the merging firms do not make efficiency claims to shareholders. Unless there is a reporting bias in this data, this means that either US law firms are better at making genuine claims in EU merger procedures, or that EU law firms represent companies that are less honest to their shareholders. Either way, an intriguing phenomenon…

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