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A Market Worth Monopolising - Investigating Market Power after Recent EC Merger Cases

Amilon, Johannes and Lönroth, Kajsa (2003)
Department of Law
Abstract
In theory, a perfectly competitive market is a market where there are many suppliers of products, their products are substitutable, all suppliers are price-takers and not price-makers, and there are no significant barriers to market entry. The opposite of perfect competition is total market domination, or monopoly. That is a market where there is only one supplier of products and where significant barriers to market entry exist. The monopolist can set the price and produce the quantities of products it chooses. The EC competition policy strives at maintaining a ''healthy'' or ''workable'' competition on the market, i.e. a state closer to perfect competition than to monopoly. The Commission, and on appeal the EC Court of First Instance, has... (More)
In theory, a perfectly competitive market is a market where there are many suppliers of products, their products are substitutable, all suppliers are price-takers and not price-makers, and there are no significant barriers to market entry. The opposite of perfect competition is total market domination, or monopoly. That is a market where there is only one supplier of products and where significant barriers to market entry exist. The monopolist can set the price and produce the quantities of products it chooses. The EC competition policy strives at maintaining a ''healthy'' or ''workable'' competition on the market, i.e. a state closer to perfect competition than to monopoly. The Commission, and on appeal the EC Court of First Instance, has the power to assess whether to allow a notified merger or not. When a merger between large undertakings is evaluated under EU competition law, it is necessary to determine the impact of the merger on consumers and competitors. If the merged entity will be dominant, i.e. holds enough market power to act independently from its competitors, the merger should not be allowed. When determining whether a possible merged undertaking will have enough market power to dominate the market it is necessary to define the relevant market on which the merged entity would operate. After such definition, the resulting market power of the merged undertaking is estimated. The Commission will have to assess whether the merger will result in negative consequences on competition on the market. In recent case law, notably the Airtours-, Schneider Electric-and Tetra Laval-cases respectively, the EC Court of First Instance did not accept the assessment of the Commission and its findings of market power. This has lead to a discussion of burden of proof imposed on the Commission, but also to the discussion about collective dominance (in markets of oligopoly) and leveraging. The cases prove that, in the future, the burden of proof laid on the Commission is substantial. Because of this, the need for complex econometric investigation of the merging undertakings has increased substantially. Therefore, it can be expected that the Commission will require merging undertakings to supply more extensive economic data at the outset of merger review in the future. In this thesis we examine the concept of market power under EC law, in the light of the recent case law from the Court of First Instance. Because of the emphasis on economics and econometrics in future merger analysis a number of theories and techniques are presented that we think might be useful to the Commission as well as to undertakings preparing a merger. After analysing the referred cases it is evident that the Commission will have to, in the future, conduct a more thorough investigation of the effects of the proposed merger, and to provide both the merging parties and the Court with substantial evidence that the proposed merger will have negative effects on competition, provided the Commission decides to prohibit the merger. (Less)
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author
Amilon, Johannes and Lönroth, Kajsa
supervisor
organization
year
type
H3 - Professional qualifications (4 Years - )
subject
keywords
Konkurrensrätt, EG-rätt
language
English
id
1555625
date added to LUP
2010-03-08 15:55:17
date last changed
2010-03-08 15:55:17
@misc{1555625,
  abstract     = {In theory, a perfectly competitive market is a market where there are many suppliers of products, their products are substitutable, all suppliers are price-takers and not price-makers, and there are no significant barriers to market entry. The opposite of perfect competition is total market domination, or monopoly. That is a market where there is only one supplier of products and where significant barriers to market entry exist. The monopolist can set the price and produce the quantities of products it chooses. The EC competition policy strives at maintaining a ''healthy'' or ''workable'' competition on the market, i.e. a state closer to perfect competition than to monopoly. The Commission, and on appeal the EC Court of First Instance, has the power to assess whether to allow a notified merger or not. When a merger between large undertakings is evaluated under EU competition law, it is necessary to determine the impact of the merger on consumers and competitors. If the merged entity will be dominant, i.e. holds enough market power to act independently from its competitors, the merger should not be allowed. When determining whether a possible merged undertaking will have enough market power to dominate the market it is necessary to define the relevant market on which the merged entity would operate. After such definition, the resulting market power of the merged undertaking is estimated. The Commission will have to assess whether the merger will result in negative consequences on competition on the market. In recent case law, notably the Airtours-, Schneider Electric-and Tetra Laval-cases respectively, the EC Court of First Instance did not accept the assessment of the Commission and its findings of market power. This has lead to a discussion of burden of proof imposed on the Commission, but also to the discussion about collective dominance (in markets of oligopoly) and leveraging. The cases prove that, in the future, the burden of proof laid on the Commission is substantial. Because of this, the need for complex econometric investigation of the merging undertakings has increased substantially. Therefore, it can be expected that the Commission will require merging undertakings to supply more extensive economic data at the outset of merger review in the future. In this thesis we examine the concept of market power under EC law, in the light of the recent case law from the Court of First Instance. Because of the emphasis on economics and econometrics in future merger analysis a number of theories and techniques are presented that we think might be useful to the Commission as well as to undertakings preparing a merger. After analysing the referred cases it is evident that the Commission will have to, in the future, conduct a more thorough investigation of the effects of the proposed merger, and to provide both the merging parties and the Court with substantial evidence that the proposed merger will have negative effects on competition, provided the Commission decides to prohibit the merger.},
  author       = {Amilon, Johannes and Lönroth, Kajsa},
  keyword      = {Konkurrensrätt,EG-rätt},
  language     = {eng},
  note         = {Student Paper},
  title        = {A Market Worth Monopolising - Investigating Market Power after Recent EC Merger Cases},
  year         = {2003},
}