Challenges for Economic Analysis of Mergers Between Potential Competitors: Steris and Synergy

25 July 2016
By Jennifer Cascone Fauver and Subramaniam (Subbu) Ramanarayanan

In an article published in the American Bar Association’s Antitrust magazine, NERA Senior Consultant Jennifer Cascone Fauver and Vice President Dr. Subramaniam (Subbu) Ramanarayanan discuss the role of economic analysis in potential competition merger cases, drawing insights from the Federal Trade Commission’s failed challenge to the merger between Steris Corporation and Synergy Health plc in 2015. Potential competition mergers exist when the merging party has not yet entered the market in which the other party to the merger is already competing. The theory of harm in potential competition cases hinges on the predicted increase in future competition that consumers in a relevant market may be denied as a result of the merger.

The article examines the world that would have existed absent a merger—known as the “but-for” world—which is often viewed as the foundation for any competitive effects analysis and which illustrates the competitive conditions that would reasonably have existed if the merger had not occurred, including the potential market entrant’s level of competition, i.e., the role that Synergy Heath would have played in constraining Steris Corporation had it remained an independent firm. An essential part of the analysis involves determining the relevant product market, analyzing the structural measures of competition, and assessing unilateral effects, which Ms. Cascone Fauver and Dr. Ramanarayanan address in detail. They conclude by observing that the FTC’s failed challenge to the merger between Steris Corporation and Synergy Health highlights the difficulties in litigating potential competition mergers. In particular, economic analysis of potential competition mergers requires careful consideration of the factual assumptions underlying key inputs to merger review and careful accounting of key differences that such mergers present when applying the normal tools of economic analysis to evaluate antitrust issues.