1. Dr Mark Williams Director, European Competition Policy Oxford 15 September 2009 Economic Analysis in European Merger Control RPI Annual Competition Policy Conference

2. 1 A Brief History of the ECMR  September 1990ECMR introduced  July 2001GE/Honeywell Merger Prohibition  Autumn 2001Airtours, Schneider and Tetra Laval CFI Decisions  May 2004New Merger Regulation – SIEC  September 2003Chief Economist and the Chief Economist Team (CET)  December 2005GE/Honeywell - Upheld on Appeal  July 2006Sony/BMG Merger Approval “Overturned” by CFI in Impala  July 2007Schneider wins Damages Against the Commission  July 2008 Sony/BMG Appeal to ECJ Overturns Impala  September 2008 Airtours Damages Rejected by CFI

3. 2 The Impact of the Courts on Process  Airtours, Schneider and Tetra Laval  Impala at the CFI  Impala at the ECJ  Schneider and My Travel Damages Cases

4. 3 Economic Analysis in European Competition Policy  The Rise of Economics  The Numerical Growth of the CET  The Increasing Influence of the CET  The Role of the Guidelines  The Role of Data  The Role of Theory

5. 4 Economic Analysis of ECMR Cases I  Unilateral effects –Single firm dominance Arjowiggins / M-Real Zanders Reflex “Cleared” with Overlap Divestment, Phase 2 Ryanair / Aer Lingus Prohibited, Phase 2 after SO, econometrics Thomson / Reuters Cleared with Divestment, Phase 2 pre SO –Bidding markets Syniverse / BSG Cleared Unconditionally, Phase 2 pre SO Nokia / Siemens Cleared Unconditionally, Phase 1 IBM / Telelogic Cleared Unconditionally, Phase 2 pre SO AEE/Lentjes Cleared Unconditionally, Phase 2 pre SO –Capacity levels and price competition Norddeutsche Affinerie / Cumerio Cleared Unconditionally, Phase 2 pre SO –Geographic market definition Ineos / Kerling Cleared Unconditionally, Phase 2 pre SO Kronospan / Constantia Cleared with Divestment, Phase 2 pre SO

6. 5 Economic Analysis of ECMR Cases II  Coordinated effects –Travelport / Worldspan Cleared Unconditionally, Phase 2, Four to Three –Sony / BMGCleared Unconditionally, Phase 2, Second Time Round  Vertical mergers –Itema / BarcovisionCleared Unconditionally, Phase 2 –Nokia / Navteq Cleared Unconditionally, Phase 2 –TomTom / TeleAtlas Cleared Unconditionally, Phase 2 –Google / Doubleclick Cleared Unconditionally, Phase 2 –SFR / Tele 2Cleared with Conduct (non-discrimination) Remedies, Phase 2  Diagonal mergers –Universal / BMGPhase 2  Minority stakes and partial ownership –Universal / BMGPhase 2 –Norddeutsche Affinerie / CumerioBKartA investigation & prohibition  Potential entry –Aker Yards / STX Phase 2 (c.f. UK case Bucher / Johnson, CC 2005)

7. 6 Diagonal Mergers  All four facilities independently owned  Sugar Beet Farm buys 100% (without control) of Cane Sugar Refinery  Sugar Beet Farm takes control of the Cane Sugar Refinery  This is neither horizontal nor vertical (in the conventional sense); prices rise Sugar Beet FarmSugar Cane Farm Beet Sugar RefineryCane Sugar Refinery Sugar Customers

8. 7 Minority Stakes - "Power is Nothing without Control" (Pirelli)  Firm A and Firm B are horizontal competitors  Power without Control - Firm A buys a 25% minority equity stake in Firm B that confers no influence or control –Firm A raises its price to internalise the cross-effect on Firm B, in which it now has a 25% stake  Power with Control - Firm A buys a 25% minority equity stake in Firm B that confers absolute control –Firm A raises its price to internalise the cross-effect on firm B in which it has a 25% stake –Firm A "forces" Firm B to raise its price above the profit maximising level because Firm A only bears 25% of the loss from “over- monopolisation” but gains 100% of any sales that divert from Firm B to Firm A

9. Contact Us Dr Mark Williams Director London / Brussels +44 207 659 8764 +32 2 282 4344 mark.williams@nera.com © Copyright 2008 NERA UK Limited All rights reserved.