Detection of Anticompetitive Horizontal Mergers

A key challenge in the work of a competition authority is the investigation of various business conducts with respect to their effects on market competition. In case of horizontal mergers, the authority typically has to investigate whether potential positive merger effects are likely outweighed by potential anticompetitive effects (such as price increases) triggered by the merger. Given this work description – and having in mind the fundamental resource and information constraints faced by the authority – a key ingredient of an efficient antitrust policy is the design (and implementation) of an appropriate investigation framework. For the authority, such a framework allows identifying (and prohibiting) the potentially most harmful mergers. For the companies, such a framework allows important (ex ante) presumptions whether a certain merger plan has a realistic chance to be given the green light by the authority. Against this background, the paper develops a four-step framework to detect anticompetitive horizontal mergers. In the first step, an estimate of the impact of the merger on the market price needs to be derived. Subsequent, the second step of the framework has to assess whether such a predicted price increase would be sustainable postmerger. The third step needs to assess whether the identified efficiencies are substantial enough to at least hold the pre-merger price level. Finally, the fourth step has to consider the effects of a horizontal merger on other competition variables such as product variety, marketing as well as R&D post-merger.

Hüschelrath, Kai (2008), Detection of Anticompetitive Horizontal Mergers, ZEW Discussion Paper No. 08-106, Mannheim.