Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Monday, February 9, 2009

Merger Efficiencies at the Federal Trade Commission 1997–2007

Posted by D. Daniel Sokol

Malcolm B. Coate and Andrew J. Heimert (both of the FTC) are authors of the important Merger Efficiencies at the Federal Trade Commission 1997–2007.

ABSTRACT: The Federal Trade Commission and the United States Department of Justice significantly expanded the efficiencies section of the Horizontal Merger Guidelines in April 1997. The revisions enhanced the structure and clarified the framework for determining when claimed efficiencies should be recognized and introduced a balancing analysis that weighed these efficiencies against the potential harm to consumers. This study reviews how FTC staff has treated efficiencies claims in the ensuing ten years, considering 186 mergers in which the Commission staff completed a second request investigation, between April 1997 and March 2007.

February 9, 2009 | Permalink | Comments (0) | TrackBack (0)

The Effect of Hospital Mergers on Inpatient Prices: A Case Study of the New Hanover-Cape Fear Transaction

Posted by D. Daniel Sokol

Aileen Thompson of the FTC has posted The Effect of Hospital Mergers on Inpatient Prices: A Case Study of the New Hanover-Cape Fear Transaction.

ABSTRACT: The Federal Trade Commission initiated a Hospital Merger Retrospective Project in 2002 to analyze the effects of consummated mergers. One of the mergers studied was the 1998 acquisition by New Hanover Regional Medical Center (“New Hanover”) of Columbia Cape Fear Memorial Hospital (“Cape Fear”) in Wilmington, North Carolina. In this paper, we employ patient-level claims data from four different insurers to estimate the effects of this merger on inpatient prices. Our results provide mixed evidence. Two of the insurers experienced substantial post-merger price increases relative to the control group of hospitals. The postmerger price changes for another insurer, however, were comparable to those for the control group, while the fourth insurer actually experienced a significant price decrease following the merger. Thus, it is difficult to draw conclusions about the impact of this merger on inpatient pricing.

February 9, 2009 | Permalink | Comments (0) | TrackBack (0)

Bruce Springsteen Opposes Ticketmaster/Live Nation Merger

Posted by D. Daniel Sokol

As much as we in the antitrust community like to think that antitrust has become bureaucratized, every once in a while we come to a politically charged deal in which the public and Congress push hard to extract various terms from the merging parties.  One such deal is that of the proposed merger of Ticketmaster and Live Nation.  Though overall the economic literature suggests that vertical integration is not anti-competitive, I can assure you that when Bruce Springsteen asks his very, very large fan base to pressure Congress, this will place significant pressure upon US antitrust enforcers to "do something" about merger terms.

February 9, 2009 | Permalink | Comments (0) | TrackBack (0)

Market Power and Vertical and Horizontal Integration in the Maritime Shipping and Port Industry

Posted by D. Daniel Sokol

Eddy van de Voorde (University of Antwerp, Economics) and Thierry Vanelslander (University of Antwerp, Transport and Regional Economics) discuss Market Power and Vertical and Horizontal Integration in the Maritime Shipping and Port Industry.

ABSTRACT: The maritime sector is undergoing constant change, as is particularly apparent in the shift in competition that has unfolded in recent years. Whereas in the past shipowners and ports used to compete with one another, the competitive struggle is now increasingly unfolding at the level of logistics chains. Today, market players are selected not so much for their stand-alone competitiveness, but on the basis of whether or not they belong to a successful maritime logistics chain. This explains why certain market players are continuously trying to gain greater control over these chains, including through vertical and horizontal alliances, mergers and acquisitions. This contribution considers in greater detail these concerted efforts to increase market power through extensive integration. First, we deal with the competitive shifts that have occurred in the port and maritime arena. Subsequently, we look at the strategic behaviour exhibited by the main market players (shipowners, terminal operating companies, port authorities, logistics service providers, etc) and analyse their objectives. Finally, we assess the consequences of the strategies pursued in the context of the anticipated future scenarios.

February 9, 2009 | Permalink | Comments (0) | TrackBack (0)

Sunday, February 8, 2009

Enhancing Market Power by Reducing Switching Costs

Posted by D. Daniel Sokol

Jan Bouckaert (University of Antwerp, Economics), Hans Degryse (Tilburg University, TILEC, European Banking Center) and Thomas Provoost (University of Leuven, Economics) write on Enhancing Market Power by Reducing Switching Costs.

ABSTRACT: Competing firms often have the possibility to jointly determine the magnitude of consumers’ switching costs. Examples include compatibility decisions and the option of introducing number portability in telecom and banking. We put forward a model where firms jointly decide to reduce switching costs before competing in prices during two periods. We demonstrate that the outcome hinges crucially on how the joint action reduces consumers’ switching costs. In particular, firms will enhance their market power if they implement measures that reduce consumers’ switching costs by a lump sum. Conversely, they will preserve market power by not implementing actions that reduce switching costs proportionally. Hence, when policy makers design consumer protection policies, they should not always adopt a favorable attitude towards efforts by firms to reduce switching costs.

February 8, 2009 | Permalink | Comments (0) | TrackBack (0)