The Use Of Bidding Studies In Merger Control

Law & Economics Workshop organized by Concurrences Review in partnership with Charles River Associates and Cleary Gottlieb.

Giulio Federico

Giulio Federico set the scene for the day’s debate. It is a prime time, he told the large crowd assembled at Cleary Gottlieb’s Brussels office, to discuss bidding studies. A more or less formal tender process is common in many markets. Indeed, the Commission has witnessed a recent stream of high-profile cases that involve some form of bidding procedures. Recent headline cases such as Baxter/Gambro, UPS/TNT, and GE/Alstom have demanded careful consideration as to when and how to apply bidding studies in merger clearance. A question that arises against a changing economic backdrop: the view that the mere existence of tender processes in a market somehow reduces the possible negative effects of a concentration is increasingly challenged.

In his analysis, Mr. Federico set out the two archetypal tendering processes. In first-price (or “sealed-bid”) auctions, bidders have little knowledge of the price or quality of competitors’ bids. The winner is determined by the lowest bid (if the products are homogenous) or the product that gives the customer the highest value (when the products are non-homogeneous). Second price (or “open outcry”) auctions more closely resemble those carried out at auction houses: the winner is determined by the runner-up bid and the participants have much greater knowledge of the value of other bids.

Photos © Emilie Gomez.

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