Making European Merger Policy More Predictable

by Voigt, Stefan; Schmidt, Andre

• ISBN13: 9781402030895
• ISBN10: 1402030894
• Format: Hardcover
• Copyright: 2005-08-30
• Publisher: Kluwer Academic Pub

Summary

Making European Merger Policy More Predictable analyses European Merger Control with regard to its capacity to generate predictability among the concerned parties. Starting from the premise that predictability is of overwhelming importance for the functioning of market economies, Voigt and Schmidt ask to what degree European Merger Control has been predictable over the last couple of years. The authors show both theoretically and empirically that there have been serious shortcomings with regard to the predictability of competition policy. They identify the insufficient recognition of the consequences of globalization on the competitive processes as well as an often inconsistent application of economic theory as the root causes for the lack of predictability. The inconsistent application of economic theory is particularly relevant with regard to potential competition and the evaluation of collective dominance. The authors generate a substantial number of proposals that could help to improve predictability. On this basis, Voigt and Schmidt critically assess the recent reforms of European Merger Control.

Table of Contents

Preface	xi
Predictability as a Crucial Condition for Economic Growth and Development	1	(12)
Introductory Remarks	1	(1)
Some Theoretical Considerations Concerning Predictability	1	(2)
Some Empirical Results Concerning Predictability	3	(2)
The Predictability of European Merger Policy	5	(6)
A Survey Amongst Large European Firms	8	(1)
Before Notification	9	(1)
After notification	10	(1)
Proposals for Improving Predictability	11	(2)
Developments in Competition Theory	13	(26)
Introductory Remarks	13	(1)
The Harvard Approach	13	(5)
Main Points	14	(2)
Policy Implications	16	(1)
Critique	16	(2)
The Chicago Approach	18	(4)
Main Points	18	(2)
Policy Implications	20	(1)
Critique	21	(1)
Contestability Theory	22	(2)
Main Points	22	(2)
Policy Implications	24	(1)
Critique	24	(1)
The Contribution of Game Theory: the New Industrial Organisation	24	(4)
Game Components	25	(1)
Advantages of Using Game Theory in Competition Theory	25	(2)
Critique Concerning the Use of Game Theory in Competition Theory	27	(1)
The Contribution of The New Institutional Economics: Transaction Cost Economics	28	(6)
Transactions and Transaction Costs	29	(1)
Assumptions of Transaction Cost Economics	30	(2)
Policy Implications	32	(2)
In lieu of a summary: Consensus and Dissensus Between the Various Approaches	34	(5)
Trends in the Business Environment	39	(14)
Liberalisation as a Driving Force of Globalisation	40	(5)
General Trends	40	(1)
Liberalisation within nation-states	41	(1)
Liberalisation by regional integration	42	(1)
Liberalisation on a worldwide scale	42	(1)
Sector-Specific Liberalisation	43	(1)
Liberalisation of goods markets	43	(1)
Liberalisation of capital markets	44	(1)
Facilitation of Foreign Direct Investment	44	(1)
Liberalisation of service markets	45	(1)
Economic and Technological Factors	45	(5)
Rapid Technological Change	45	(1)
Increasing Mobility of Supply	46	(1)
Developments in Transport Costs	46	(1)
The Internet	47	(2)
Homogenisation of Preferences	49	(1)
Rapid Change of Consumption Patterns	50	(1)
Conclusions	50	(3)
Possible Consequences of Trends in Theory (B) and Developments in Business (C) for Competition Policy	53	(66)
Introduction	53	(1)
From Market Definition to Assessing Dominance	54	(33)
The Standard Approach	54	(1)
The relevant product market	55	(1)
The relevant geographic market	56	(1)
Defining relevant markets in practice: the hypothetical monopolist test	57	(1)
Predicting the post-merger structure	57	(1)
Assessing Single Dominance	58	(2)
Consequences of Recent Theoretical Developments	60	(1)
Consequences of Recent Trends in Business Environment	61	(2)
Current EU Practice	63	(1)
The Relevant Product Market	63	(3)
The Relevant Geographic Market	66	(2)
Assessing Dominance	68	(3)
Proposals Towards Enhancing Predictability	71	(1)
Simple Tools	72	(1)
Delineate Relevant Market Taking Both Demand and Supply Side Into Account	72	(1)
Reliance on Quantitative Methods to Delineate the Relevant Market	73	(2)
Reliance on Quantitative Methods to Assess Dominance	75	(1)
Some Critical Remarks Concerning Quantitative Techniques	76	(1)
Assessing the Importance of Customer Loyalty for Delineating the Relevant Market More Systematically	77	(2)
Improvements Due to Theoretical Developments	79	(1)
Take Efficiencies Explicitly into Consideration	79	(5)
Assess Importance of Asset Specificity	84	(1)
Assess Importance of Uncertainty	85	(1)
Assess Importance of Frequency	85	(1)
Improvements Due to Trends in the Business Environment	86	(1)
Taking the time dimension adequately into account	86	(1)
Taking the geographic dimension adequately into account	87	(1)
A Closer Look at Barriers to Entry and Contestability	87	(13)
The Standard Approach	87	(2)
State-Mandated Barriers to Entry	89	(1)
Structural Barriers to Entry	89	(1)
Strategic Barriers to Entry	90	(1)
Consequences of Recent Theoretical Developments	91	(2)
Consequences of Recent Trends in the Business Environment	93	(1)
Current EU Practice	94	(3)
Proposals Towards Enhancing Predictability	97	(3)
Assessing Collective Dominance	100	(19)
Standard Approach	102	(2)
Recent Theoretical Developments	104	(4)
Recent Trends in the Business Environment	108	(2)
Current EU Practice	110	(3)
Reform Proposals	113	(6)
Case Studies	119	(42)
Assessment of Barriers to Entry in European Merger Control: The Cases of Volvo/Scania, Mercedes-Benz/Kassbohrer, and MAN/Auwarter	120	(9)
Barriers to Entry in the Case of MERCEDES-BENZ/KASSBOHRER	120	(2)
Barriers to Entry in the Case of VOLVO/SCANIA	122	(1)
The Market for Heavy Trucks	122	(1)
The Market for Buses	123	(1)
Man/Auwarter	124	(1)
Economic Assessment	125	(4)
Assessment of Barriers to Entry in European Merger Control: The Cases of SCA/Metsa Tissue and SCA Hygiene Products/Cartoinvest	129	(7)
Barriers to Entry in SCA/METSA Tissue	129	(2)
Barriers to Entry in SCA Hygiene Products/Cartoinvest	131	(1)
Comparison of the Decisions	132	(1)
Economic Assessment	132	(4)
Assessment of Barriers to Entry in European Merger Control: The Case of BASF/Bayer/Hoechst/Dystar	136	(3)
Barriers to Entry in the Case of BASF/BAYER/HOECHST/DYSTAR	137	(1)
Economic Assessment	138	(1)
The Assessment of Barriers to Entry in European Merger Control: The Markets for Telecommunications in the Case of Telia/Telenor	139	(7)
The Special Conditions for Entry in the Markets for Telecommunications	140	(2)
The Case of TELIA/TELENOR	142	(2)
Assessment of the Decision	144	(2)
Collective Dominance under the European Merger Regulation	146	(15)
Nestle/Perrier (1992)	146	(3)
KALI&SALZ/MDK/TREUHAND (1993)	149	(1)
GENCOR/LONRHO (1996)	150	(2)
EXXON/MOBIL (1999)	152	(2)
Airtours/First Choice (1999)	154	(3)
UPM-KYMMENE/Haindl and Norske Skog/Parenco/Walsum (2001)	157	(4)
Practical Proposals	161	(16)
Introductory Remarks	161	(1)
Overview of Substantive Proposals as Developed in Chapter IV	161	(5)
Procedural Proposals	166	(9)
Conclusions and Outlook	175	(2)
Appendix	177	(4)
Endnotes	181	(4)
References	185	(6)
Index	191