Optimizing the pre-merger notification rule with regulatory data: Empirical analysis from China

This paper leverages a regulatory dataset from the China antitrust authority to provide methodological guidance for improving the pre-merger notification rule, examining both its form and level. We simulate the government's decision-making process and use the Receiver Operating Characteristic (ROC) curve to optimize the rule. Our goal is to address concerns about excessively low thresholds or complex criteria (Type I error) and unreasonably high thresholds or singular criteria (Type II error). We find that China's current notification threshold levels tend to be rigid. Relative to the turnover-based "Size-of-Person" criterion, the "Size-of-Transaction" criterion appears more effective for identifying potential anti-competitive cases in a "simple and objective" manner. Although the study is based in China, the techniques and empirical findings are expected to have broader implications.