Tuesday, April 19, 2011
Posted by D. Daniel Sokol
Jan Peter van der Veer (RBB Economics) addresses The Use of Empirical Techniques in European Commission Merger Cases.
ABSTRACT: In recent years, there has been a trend towards a more systematic use of detailed empirical analysis in the assessment of merger cases by the European Commission. This trend owes its roots to the Court of First Instance's judgments in the Airtours/First Choice, Tetra Laval/Sidel, and General Electric/Honeywell cases, which made it clear that any theory of competitive harm advanced by the Commission must specify the conditions that gave rise to that harm and test those conditions against observed industry characteristics and behavior. The Commission took the lessons from these judgments to heart in the reform package that was implemented in 2004 and, indeed, it has since taken more responsibility to further develop the empirical side of its merger analysis. The creation of the post of Chief Economist and the subsequent hires made by the Commission to build a dedicated unit of economists have undoubtedly played a key role in this development. In this article, we review the main empirical analyses applied by the European Commission in recent merger cases, focusing on unilateral effects cases. In Section 2, we set out the basic framework for the analysis of unilateral effects. Section 3 reviews methods that focus on assessing the strength of the competitive constraint between the merging parties. In Section 4, we examine merger simulation approaches that seek to estimate the price impact of a merger. Section 5 provides some concluding remarks.