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Effectiveness of Merger Remedies: The Case of Chilean Gasoline Retail Markets

30 Pages Posted: 6 Dec 2016 Last revised: 27 Jul 2017

Vicente Lagos

Telecom ParisTech

Date Written: December 4, 2016

Abstract

This article assesses the impact of the Shell-Terpel merger on retail prices in Chile, and evaluates the effectiveness of outlet divestitures as a merger remedy. Results show a modest but significant increase in margins of gas stations geographically impacted by the merger. Divestitures were effective in mitigating this anticompetitive effect, but only for retail outlets located within a 2 km. radius from a divested station. These findings highlight the importance of taking into account the structure of local markets when designing a divesture package. Specifically, in this case one-fifth of the divested stations are located outside the relevant 2 km. radius. Moreover, the evidence suggests that giving the option to the divested stations of keeping the Terpel brand may act as a strategic tool to soften price competition.

Keywords: Divestitures, Gasoline Retail Markets, Merger Evaluation, Merger Remedies

JEL Classification: K21, L13, L41, L81

Suggested Citation

Lagos, Vicente, Effectiveness of Merger Remedies: The Case of Chilean Gasoline Retail Markets (December 4, 2016). Available at SSRN: https://ssrn.com/abstract=2880135 or http://dx.doi.org/10.2139/ssrn.2880135

Vicente Lagos (Contact Author)

Telecom ParisTech ( email )

46 rue Barrault
F-75634 Paris, Cedex 13
France

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