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The Economic Assessment of Mergers under European Competition Law

The Economic Assessment of Mergers under European Competition Law

Author: Daniel Gore; Stephen Lewis; Andrea Lofaro; Frances Dethmers
Publisher: Cambridge University Press
ISBN: 9781107007727
Published In: April 2013
Format: Hardback , 556 pages
Jurisdiction: European Union ? Disclaimer:
Countri(es) stated herein are used as reference only

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This concise and practical guide to the most important economic techniques and evidence employed in modern merger control draws on the authors' extensive experience in advising on European merger cases. It offers an introduction to the relevant economic concepts and analytical tools, and stand-alone chapters provide an in-depth overview of the theoretical and practical issues related to market definition, unilateral effects, coordinated effects and non-horizontal mergers. Each form of economic evidence and analysis is illustrated with practical examples and an overview of key merger decisions.

• Provides non-economists with an accessible and non-technical overview of the relevant economics

• Draws extensively on European merger case law in order to demonstrate how techniques and evidence are used in practice

• Practical examples illustrate the application of economic principles to merger analysis

Table of Merger Decisions	viii
Acknowledgments	xiii
Foreword by Nicholas Levy	xv
A Comment on the Text by Professor Jeffrey Church	xvii
1 Introduction	1
1. Purpose and scope of this book	1
2. Legal framework and Commission procedure	3
2.1 The Merger Regulation	3
2.2 Procedure for notification and assessment	7
3. The role of economics in EU merger control	12
4. Basic economic concepts	13
4.1 The demand curve	14
4.2 The cost curve	20
4.3 Profit maximisation	23
4.4 Market power	24
5. Empirical economic evidence	27
2 Market definition	31
1. Introduction	31
2. Conceptual framework	33
2.1 The hypothetical monopolist/SSNIP test	33
2.2 Issues and complications arising in market definition	36
3. Empirical techniques to assess market definition	43
3.1 Critical loss analysis	46
3.2 Demand estimation	64
3.3 Survey evidence	74
3.4 Analysis of sales patterns	81
3.5 Analysis of price levels	93
3.6 Price correlation analysis	105
3.7 Stationarity analysis	127
3.8 Shock analysis	134
3 Horizontal mergers I: unilateral effects	148
1. Introduction	148
2. Important competitive constraints: economic theory and the EC Horizontal Merger Guidelines	150
2.1 Economic theory and key concepts	150
2.2 Important competitive constraints in the EC Horizontal Merger Guidelines	158
2.3 Commission's recent enforcement practice	163
3. Important competitive constraints between the parties: empirical techniques	176
3.1 Survey evidence	177
3.2 Customer switching analysis	183
3.3 Price/concentration studies and analysis of the impact of rivals' presence	191
3.4 Entry analysis	207
3.5 Natural experiments	211
3.6 Merger simulation	214
3.7 Win/loss and bidding analysis	231
4. Further issues relevant in the assessment of unilateral effects	251
4.1 Introduction	251
4.2 Elimination of potential competition	252
4.3 Rivals' ability to increase supply	258
4.4 Switching costs	275
4.5 Partial ownership	282
5. Countervailing factors	288
5.1 Introduction	288
5.2 Buyer power	288
5.3 Product repositioning and new entry	298
5.4 Efficiency analysis	304
5.5 Failing firm defence	310
4 Horizontal mergers II: coordinated effects	318
1. Introduction	318
2. Economic concepts	321
2.1 Textbook tacit coordination	321
2.2 Factors that affect the critical discount factor	326
3. Framework for the assessment of coordinated effects	335
3.1 Will the merged entity and remaining competitors be able to reach a tacit understanding?	337
3.2 Are market characteristics such that any tacit understanding would likely be sustained?	349
3.3 Will the proposed transaction make it significantly more likely that tacit coordination will occur or make tacit coordination more effective?	368
5 Non-horizontal mergers	378
1. Introduction	378
2. Economic concepts	380
2.1 Pro-competitive effects	380
2.2 Foreclosure and anti-competitive foreclosure	385
2.3 Other anti-competitive effects	389
3. Vertical mergers: input foreclosure	391
3.1 Ability to engage in input foreclosure	393
3.2 Incentive to engage in input foreclosure	409
3.3 Effect of input foreclosure	428
4. Vertical mergers: customer foreclosure	430
4.1 Ability to engage in customer foreclosure	432
4.2 Incentive to engage in customer foreclosure	439
4.3 Effect of customer foreclosure	446
4.4 Customer foreclosure: EU case law	448
5. Conglomerate mergers	452
5.1 Ability to foreclose in conglomerate mergers	455
5.2 Incentive to foreclose in conglomerate mergers	458
5.3 Effects of foreclosure in conglomerate mergers	461
5.4 Foreclosure in conglomerate mergers: an example	464
5.5 Assessment of foreclosure in conglomerate mergers: EU case law	480
6. Diagonal mergers	502
6.1 Diagonal mergers: an example	503
6.2 Case study: Google/Doubleclick – assessment of diagonal effects	504
Appendix ARegression analysis and econometrics	507
1. Regression analysis and statistical inference	507
2. Regression analysis, endogeneity and the identification of economic effects	515
Appendix BModels for demand estimation	520
1. Introduction	520
1.1 Alternative models for continuous demand estimation	520
1.2 Models for discrete demand estimation	522
Index	526