In a new article for the Competition Law & Policy Debate, Director Dr. Nicola Tosini and Dr. Oliver März discuss the proportionality of remedies in horizontal mergers in differentiated-products markets. In this context, the authors take issue with a simplistic approach often taken by competition authorities in designing remedies, according to which the elimination of the competition concern is equated with the elimination of the whole horizontal overlap between the merging firms. Based on established economic concepts, the authors demonstrate that such a broad-strokes approach may violate the proportionality principle and that two factors need to be evaluated to ensure divestiture proportionality:
- The strength of out-of-market constraints; and
- The closeness of competition between retained and divested products.
The stronger these two effects are, the less likely it is that a divestiture of products close to the market boundary is necessary to eliminate the competition concern.
