Originally from:
International Antitrust Law & Policy: Fordham Competition Law 2006 - PDF
International Antitrust Law & Policy: Fordham Competition Law 2006 - Hardcover
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Chapter 13
COORDINATED EFFECTS IN MERGER
REVIEW: QUANTIFYING THE PAYOFFS
FROM COLLUSION
William E. Kovacic,* Robert C. Marshall,** Leslie M. Marx,***
Steven P. Schulenberg****
ABSTRACT
Mergers can affect the extent of coordinated interaction among firms
in an industry by changing the payoffs from such conduct. Coordinated
effects analyses currently provide little quantification of these payoff
changes. Our proposed approach quantifies the magnitude of the potential
post-merger gains from incremental explicit collusion by subsets of firms
in the post-merger industry. Large (small) payoffs imply that coordinated
effects may (not) be a substantial concern. We provide two abstract
examples and discuss the application of the methods to Airtours.
I. INTRODUCTION
Competition policy recognizes that mergers tend to create
incremental opportunities for coordinated behavior as reflected in Section
2 of the Horizontal Merger Guidelines (Guidelines) of the Federal Trade
Commission (FTC) and Department of Justice (DoJ).1 The Guidelines
implicitly demand an understanding of the incremental payoffs from
coordinated behavior as a consequence of a merger; however, merger
analysis often lacks a quantification of these incremental payoffs. In this
paper we propose an additional analysis that could be performed as part
of a merger review that would provide such a quantification. Under the
* Commissioner, U.S. Federal Trade Commission, Washington.
** Penn State University, University Park and Bates White, LLC, Washington.
*** Duke University, Durham.
**** Bates White, LLC, Washington.
