EU Merger Control in Differentiated Product Industries

30 Pages Posted: 10 Nov 2004

See all articles by Patrick Paul Walsh

Patrick Paul Walsh

UCD; Institute for the Study of Labor (IZA)

Franco Mariuzzo

Trinity College (Dublin) - Department of Economics

Ciara Whelan

University College Dublin

Date Written: October 2004

Abstract

EU Merger Control Regulation No 4064/89 tended to rely on a dominance test, based on the market share of undertakings, to indicate the level and potential changes in market power. The use of such in differentiated product industries is questionable. New EC Merger Regulation No 139/2004 introduces a substantive test to ensure that all post-merger scenarios posing a threat to competition, even amongst small undertakings, are detected. We propose the use of a simple structural approach to undertake a substantive test. We illustrate our point over 28 periods, 178 products (13 companies), for Retail Carbonated Soft Drinks. We estimate company (product) mark-ups using a "simple" Nested Logit model, Berry (1994) and a more "sophisticated" model, Berry, Levinsohn and Pakes (1995). While the dominance test may fail to identify damaging mergers in differentiated products industries, this technique will not.

Keywords: market shares, market power, differentiated products industries, mergers

JEL Classification: K2, L11, L25, L40, L81

Suggested Citation

Walsh, Patrick Paul and Mariuzzo, Franco and Whelan, Ciara, EU Merger Control in Differentiated Product Industries (October 2004). Available at SSRN: https://ssrn.com/abstract=617924 or http://dx.doi.org/10.2139/ssrn.617924

Patrick Paul Walsh (Contact Author)

UCD ( email )

University College Dublin
Belfield, Dublin Dublin 4
Ireland

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Franco Mariuzzo

Trinity College (Dublin) - Department of Economics ( email )

Dublin 2
Ireland

Ciara Whelan

University College Dublin ( email )

Belfield
Belfield, Dublin 4 4
Ireland

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