Monday, May 28, 2012
Posted by D. Daniel Sokol
Jurjen J.A. Kamphorst (Department of Economics, Erasmus School of Economics and Tinbergen Institute) and Vitaly Pruzhansky analyze VERTICAL THEORY OF HARM IN A HORIZONTAL MERGER: THE FRIESLAND FOODS/CAMPINA CASE.
ABSTRACT: In December 2008, the European Commission (EC) cleared the proposed merger between the two largest dairy cooperatives in the Netherlands. The transaction raised several interesting economic issues that were hotly debated during the EC investigation. In this article, we review the EC's proposed theory of harm relating to the impact of the merger on the market for raw milk in the Netherlands and the ability of the parties' competitors to source raw milk (a critical input) post-merger. We show that the EC's theory is unlikely to be supported by economic theory and facts of the market.