A Shopping List for Assessing the Competitive Effects of Retail Chain Mergers
1 December 2005
By Dr. Elizabeth Bailey with Dr. Timothy Daniel and Dr. Robert Rubinovitz
The past several years have witnessed a number of mergers and acquisitions between large retail chains. Because retailers are differentiated in terms of the range of products they offer, the price points at which they sell products, and their geographic coverage, determining the intensity of competition between the merging parties and other retailers such as local retail venues, specialty retailers, and mass merchandisers requires careful empirical analysis. In addition to potential price effects, nonprice effects--such as a reduction in merchandized assortment, store service, and/or store improvements -- may be a potential competitive concern.
This article from Antitrust provides a "shopping list" of seven items that contribute to a solid economic analysis of the complex antitrust issues that arise in transactions between chain store retailers. These items include preparing maps of local geographies, identifying competing retailers using survey data and econometrics, giving careful consideration to issues raised by national pricing, quantifying the benefits of the merger, and using econometrics to evaluate divestiture proposals. The authors note that these analyses can play an important role in successfully navigating the antitrust review process by allowing the parties to assess internally the likely competitive issues that may arise from a proposed retail chain transaction and by facilitating productive communications with the antitrust agencies.
This article, from the Fall 2005 issue of Antitrust, has been reproduced with permission from the American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
