Unilateral Effects Screens for Partial Horizontal Acquisitions: The Generalized HHI and GUPPI

56 Pages Posted: 7 Jul 2015 Last revised: 17 Jun 2018

See all articles by Duarte Brito

Duarte Brito

New University of Lisbon

António M. Osório C.

Universitat Rovira i Virgili

Ricardo Ribeiro

Universidade Católica Portuguesa, Católica Porto Business School

Helder Vasconcelos

Universidade do Porto - Faculdade de Economia (FEP)

Date Written: March 1, 2018

Abstract

Recent years have witnessed an increased interest, by competition agencies, in assessing the competitive effects of partial acquisitions. We propose a generalization of the two most traditional indicators used to screen unilateral anti-competitive effects - the Herfindahl-Hirschman Index and the Gross Upward Price Pressure Index - to partial horizontal acquisition settings. The proposed generalized indicators are endogenously derived under a probabilistic voting model in which the manager of each firm is elected in a shareholder assembly between two potential candidates who seek to obtain utility from an exogenous rent associated with corporate office. The model (i) can cope with settings involving all types of owners and rights: owners that can be internal to the industry (rival firms) and external to the industry; and rights that can capture financial and corporate control interests, can be direct and indirect, can be partial or full, (ii) yields an endogenous measure of the owners ultimate corporate control rights, and (iii) can also be used - in case the potential acquisition is inferred to likely enhance market power - to devise divestiture structural remedies. We also provide an empirical application of the two proposed generalized indicators to several acquisitions in the wet shaving industry, with the objective of providing practitioners with a step-by-step illustration of how to compute them in antitrust cases.

Keywords: Antitrust, Partial Horizontal Acquisitions, Oligopoly, Screening Indicators, HHI, GUPPI, Corporate Control, Banzhaf Power Index

JEL Classification: L13, L41, L66

Suggested Citation

Brito, Duarte and Osório Costa, António Miguel and Ribeiro, Ricardo and Vasconcelos, Helder, Unilateral Effects Screens for Partial Horizontal Acquisitions: The Generalized HHI and GUPPI (March 1, 2018). International Journal of Industrial Organization, Vol. 59, 2018. Available at SSRN: https://ssrn.com/abstract=2627103 or http://dx.doi.org/10.2139/ssrn.2627103

Duarte Brito

New University of Lisbon ( email )

1099-085 Lisboa, 1099-085
Portugal

António Miguel Osório Costa

Universitat Rovira i Virgili ( email )

Av. de la Universitat 1
Reus, Tarragona 43204
Spain
(+34)977759891 (Phone)

HOME PAGE: http://gandalf.fcee.urv.es/departaments/economia/professors/aosorio/

Ricardo Ribeiro (Contact Author)

Universidade Católica Portuguesa, Católica Porto Business School ( email )

Rua Diogo Botelho, 1327
Porto, 4169-005
Portugal
+351-22619-6200 (Phone)
+351-22619-6291 (Fax)

Helder Vasconcelos

Universidade do Porto - Faculdade de Economia (FEP) ( email )

Rua Dr. Roberto Frias
s/n
4200-464 Porto, 4200-464
Portugal

HOME PAGE: http://www.fep.up.pt/docentes/hvasconcelos

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