1. Mergers in two-sided markets: Flower power in Dutch auction houses? BIICL 6th Annual Merger Control Conference Neil Marshall, Managing Consultant November 16th 2007

2. 2 More layers in the supply chain Trading platforms/ auction houses Buyers Sellers Buyers Sellers Direct trading

3. November 16th 20073 Impact of two-sided nature of the service Price structure and level now matters Which price should be used? Application of the SSNIP test Is it right to consider that any price rises would be applied proportionally? Market definition What if the merging parties have different pricing strategies?

4. November 16th 20074 Incorporating two-sidedness into the SSNIP One-sided critical loss -establish critical loss (t/(m+t) -where t=5–10%, m=(p – c)/p -estimate actual loss -based on demand elasticities: own price for first iteration of the test; with information on cross-price elasticities incorporated in subsequent rounds -if actual > critical loss then market not identified Two-sided critical loss -need to incorporate the demand/supply interactions -NMa, in FloraHolland 1, incorporated these in its survey: -how would sellers respond to a 5% reduction in the number of buyers using the platform and -vice versa 1 NMa (2007), Coöperatie Bloemenveiling Aalsmeer U.A. and Coöperatieve Bloemenveiling FloraHolland U.A., merger clearance, August 21st.

5. November 16th 20075 How should the analysis differ? Is this genuinely a two-sided function? How strong are the demand/supply interactions? What outside options are available? Careful of over- application of the concept Summary

6. www.oxera.com Contact: Neil Marshall +44 (0) 1865 253 073 neil.marshall@oxera.com Oxera Consulting Ltd is registered in England No. 2589629 and in Belgium No. 0883.432.547. Registered offices at Park Central, 40/41 Park End Street, Oxford, OX1 1JD, UK, and Stephanie Square Centre, Avenue Louise 65, Box 11, 1050 Brussels, Belgium. Although every effort has been made to ensure the accuracy of the material and the integrity of the analysis presented herein, the Company accepts no liability for any actions taken on the basis of its contents. Oxera Consulting Ltd is not licensed in the conduct of investment business as defined in the Financial Services and Markets Act 2000. Anyone considering a specific investment should consult their own broker or other investment adviser. The Company accepts no liability for any specific investment decision, which must be at the investor’s own risk. © Oxera, 2007. All rights reserved. Except for the quotation of short passages for the purposes of criticism or review, no part may be used or reproduced without permission.