The Economics of European Merger Control -- Oxford Competition Policy and Regulation Conference
15 September 2008- 16 September 2008
Hosted By: the Regulatory Policy Institute
NERA Director Mark Williams, who leads NERA's European Competition Policy group in London and Brussels, spoke on the Economics of European Merger Control at the Oxford Competition and Regulation Policy conference organised by the Regulatory Policy Institute.
Dr Williams began by outlining the shifting contexts of substantive merger assessment arising from the interplay of court judgements such as the CFI appeals in Airtours, Schneider and Tetra Laval, the CFI and ECJ Impala judgements and the CFI judgements on damages in Schneider and My Travel.
Dr Williams then outlined the rise of economic analysis in European merger cases, and the significant boost to the role of economics generated by the appointment in 2003 of a Chief Economist at DG Comp, and the creation of a twenty-strong Chief Economist Team (CET). These influences included the earlier involvement of economists in substantive assessment, increased data intensity of cases, and the role of economics-based guidelines in shaping the analytic framework of merger review.
In his presentation Dr Williams provided an overview of ECMR Phase 2 merger cases in recent years. He argued that the economic focus points in these cases were becoming increasingly clear, and identified three emerging themes.
First, whilst noting that the two outright prohibitions of recent years, EDP/ENI/GDP and Ryanair/Aer Lingus both involved very high market shares that would satisfy a dominance standard, Dr Williams noted the shift of focus in analysis since Sony/BMG from collective dominance towards unilateral effects, and then non-coordinated effects analysis, reflecting the clarity introduced by the revised substantive test of Significant Impediment to Effective Competition (SIEC). Particularly notable was the Commission's increasing focus on win-loss data in bidding markets (e.g., Oracle/Peoplesoft, Nokia/Siemens, Syniverse/BSG, and IBM/Telelogic).
The second major trend was the shift towards the use of analytic frameworks set out in the guidelines, evidenced by the explicit use of the non-horizontal guidelines and "vertical arithmetic" in recent vertical cases such as Nokia/Navteq and TomTom/Teleatlas. The decisions in these cases, and the approach adopted, differ sharply from cases such as Tele2/SFR, where extensive behavioural commitments were required in a vertical context.
Third, the Commission was starting to develop and apply new economics-based theories of harm. Economic analysis shows that harm can in principle arise from diagonal mergers, where a firm acquires, but does not supply inputs to, a rival to one of its customers, or from partial ownership or minority stakes that confer positive or negative control. These theories are reflected in the approach adopted in Universal/BMG Music Publishing. Equally, whereas entry conditions are traditionally used as a theory of defence, the Commission has also examined mergers to establish whether they may reduce competition by eliminating a potential entrant (e.g. Aker Yards/MTX), a case that mirrors the 2005 UK investigation of Bucher/Johnson.
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