Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Wednesday, March 14, 2007

Contestability and Regulation Revisited and Applications to Pro-Competitive Mergers

Posted by D. Daniel Sokol

Yesterday in my seminar, we focused on procedural issues in international merger control, including agency coordination, increased harmonization of standards and approaches, and why divergences remain.  Next week we focus on comparative substantive merger analysis.  Helping out my class on these difficult issues are Joe Krauss of Hogan & Hartson (yesterday) and Ken Heyer of DOJ (next week).  As a comment on teaching pedagogy, the class has found that  real world enforcers and practitioners (both the lawyers and economists) have been extremely beneficial and insightful in rounding out the more theoretical readings and case analysis.

On the topic of mergers, Michael Ryan of the University of Hull Business School has a new working paper on SSRN entitled Contestability and Regulation Revisited and Applications to Pro-Competitive Mergers.

ABSTRACT: The purpose of this paper is to revisit the contestability idea and to formalize distinctions between industrial contestability and market contestability (analogous to those between industrial and market diversification) as well as the definition of regulated contestability. Applications to mergers and merger policy are then developed in a context of positive spillovers, with reference to brand enhancing effects and with reference to R&D and other cost reducing effects. A major conclusion of the paper is that, far from raising barriers to entry, mergers may have contestability enhancing effects and in such cases should be actively encouraged by regulators.

http://lawprofessors.typepad.com/antitrustprof_blog/2007/03/contestability_.html

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