Day Two, Session One Competitive Effects Andreas Bardong Head of Section Merger Policy, Bundeskartellamt, Germany

ICN Merger Workshop Taipei March Outline Day Two Session One Brief Overview on competitive effects analysis, guidance from:  ICN Recommended Practices for Merger Analysis  ICN Merger Guidelines Workbook Role Play:  Interviews of competition official with competitor  Interview with customer Your turn:  Analysis of Information provided in interviews in Break out session

ICN Merger Workshop Taipei March Competitive Harm Will the merger lead to competitive harm? Competitive Harm Price increase Negative effect on innovation Limitation of output Negative effect on quality and variety

ICN Merger Workshop Taipei March Counterfactual Situation pre- merger Situation without the merger (Counterfactual) Likely situation post-merger How does the merger change the situation on the market?

ICN Merger Workshop Taipei March Competitive Effects Mainstream theories of competitive harm? Competitive Effects Unilateral Effects Coordinated Effects

ICN Merger Workshop Taipei March Types of Mergers Negative competitive effects can occur as a result of different types of mergers Horizontal Merger vertical mergers Typical case: Also possible: Conglomerate mergers

ICN Merger Workshop Taipei March Competitive Effects (II) Unilateral Effects  Non-coordinated action by market participants  In particular: Merging firms are able to excercise market power, e.g. raise price, limit output or quality  Merger eliminates competition between merging parties Coordinated Effects  Coordination of behaviour between companies in a market (not necessarily collusion).  Merging parties and some competitors coordinate on price, output, or customer/market allocation.  Merger increases the liklihood of coordination or strengthens existing coordination.

ICN Merger Workshop Taipei March Coordinated Effects Costly to cheat (other must be able to detect and punish cheating) Competitive constraints from outside must be weak (other competitors, buyer-power, entry) Ability to identify terms of coordination Is coordination stable? Does merger change situation?

ICN Merger Workshop Taipei March Coordinated Effects (II)  Relevant factors include: Market transparency Maverick firms spare capacity of non- Participating competitors, barriers to entrys Multimarket contacts and symmetry Buyer power Structural links between companies Product homogeneity