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Do Vertical Partial Ownership Interest Acquisitions Create a Potential for Input Foreclosure?
03 January 2023
Dr. Ildiko Magyari
Senior Consultant Dr. Ildikó Magyari recently authored an article titled “Do Vertical Partial Ownership Interest Acquisitions Create a Potential for Input Foreclosure?", published in the ABA Antitrust Law Section Economics Committee Newsletter. In it, she uses vGUPPIs framework to illustrate how vertical partial ownership interest acquisitions may create incentives for input foreclosure through raising a rival’s costs.
Dr. Magyari also shows, through examples, that such incentives may arise if the acquisition of a financial interest by a downstream firm in its upstream supplier is accompanied by a right of the acquiring firm to also set the target’s post-acquisition prices. The examples also indicate that such incentives may be more likely to arise the lower the financial interest that the acquiring firm obtains in the target. The article concludes that assessing the existence of incentives for input foreclosure under more complex corporate structures before and after a vertical partial ownership interest acquisition requires a more formal mathematical model, which, similarly to the modified upward pricing pressure framework, would integrate financial interest and corporate control within the vGUPPIs framework.
ABA members may also read the article with illustrations here.
This excerpted article is posted here with permission of 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 stored in an electronic database or retrieval system without the express written consent of the American Bar Association.