Making European Merger Policy More Predictable
Description
Making European Merger Policy More Predictable analyses European Merger Control with regard to its capacity to generate predictability among the concerned parties. Starting from the premise that predictability is of overwhelming importance for the functioning of market economies, Voigt and Schmidt ask to what degree European Merger Control has been predictable over the last couple of years. The authors show both theoretically and empirically that there have been serious shortcomings with regard to the predictability of competition policy. They identify the insufficient recognition of the consequences of globalization on the competitive processes as well as an often inconsistent application of economic theory as the root causes for the lack of predictability. The inconsistent application of economic theory is particularly relevant with regard to potential competition and the evaluation of collective dominance. The authors generate a substantial number of proposals that could help to improve predictability. On this basis, Voigt and Schmidt critically assess the recent reforms of European Merger Control.
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CASE STUDIES (p.119)
This chapter describes the concrete decision-making of the European Commission, based on a number of cases, and subsequently evaluates the Commission's approach from an economic point of view. Based on these specific cases, we consider to what degree the actual decision-making diverges from the procedures generated in the last chapter. The discussion of the cases serves to identify weaknesses and inconsistencies. It thereby illustrates the many possibilities for improving European merger policy. At centre stage are cases concerning barriers to entry and collective dominance/ coordinated effects. It is in the nature of case studies that not all pertinent cases are discussed, but only a sample. Some criteria guiding the selection of cases are therefore needed. Here, two criteria are paramount: some cases were chosen because they seemed to display great similarities either with regard to the relevant markets or with regard to the competitive concerns stated by the Commission. The second criterion was that the cases displayed some sort of precedent effect, and could have been instrumental in shaping the decision-practice in more than just the specific case under scrutiny.
Cases in which barriers to entry played an important role are discussed first. The Commission has been called on to analyse more than one merger involving the markets for buses and heavy trucks. It was decided to look at some of these cases because prima facie the issues analysed seem very similar. The cases dealt with in some detail are MERCEDES-BENZ/KÄSSBOHRER; VOLVO/SCANIA and MAN/AUWÄRTER. Furthermore, two cases dealing with tissue products are also discussed (SCA/METSÄ TISSUE and SCA HYGIENE PRODUCTS/CARTOINVEST).
Additionally, the case BASF/BAYER/HOECHST/DYSTAR has been included because in this case, the Commission delineated the global market as the relevant geographic market due to an absence of barriers to entry. Finally, the increased relevance of telecommunications services and the particular conditions present in these markets make a specific assessment of these markets necessary, and hence the decision in TELIA/TELENOR is discussed with regard to the role of potential competition.
In the second part of the chapter, the most important decisions with regard to collective dominance/coordinated effects will be analysed. These are the cases concerning NESTLÉ/PERRIER, KALI&SALZ/MDK/TREUHAND, GENCOR/LONRHO, EXXON/MOBIL, AIRTOURS/FIRST CHOICE, UPM-KYMMENE/HAINDL, and NORSKE SKOG/PARENCO/WALSUM.
1. ASSESSMENT OF BARRIERS TO ENTRY IN EUROPEAN MERGER CONTROL: THE CASES OF VOLVO/SCANIA, MERCEDESBENZ/ KÄSSBOHRER, AND MAN/AUWÄRTER
In March 2000, the European Commission declared the merger between VOLVO and SCANIA, two Swedish manufacturers of trucks and buses, as incompatible with the Single Market because their combined operations would create or strengthen a market dominant position in the markets for heavy trucks and buses. Five years earlier, in spite of considerable increases to market shares in the German bus market, the Commission had declared the acquisition of KÄSSBOHRER by MERCEDES-BENZ as compatible with the Single Market with reference to potential competition, which would lead to a progressive opening of the German market. Although both cases are concerned with the same, or at least similar, markets, in assessing barriers to entry the Commission reaches different conclusions: while in MERCEDES-BENZ/KÄSSBOHRER, the Commission considers barriers to entry into the German bus market as not sufficiently high, in VOLVO/SCANIA, when considering the Scandinavian markets, it reaches the opposite conclusion. The following case study scrutinises the decisions of the Commission.
