Econometric analyses of unilateral effects in merger cases

Econometric analyses such as demand estimation and reduced form price analysis are increasingly being used in Europe by both competition authorities and the merging parties to provide direct evidence on the unilateral effects of mergers. Unlike most other evidence and analyses used in merger assessment it is possible to objectively assess the robustness and statistical reliability of econometric analy-ses, and this is a major issue in every merger case that involves such analyses. However, since any econometric analysis involves dealing with a range of complex methodological issues it is almost inevitable that there will be some limitations with the analysis. These limitations should not be used to dismiss the analysis in its entirety, but should determine how much weight is placed on the analysis in the merger assessment.

Introduction 1. The use of econometric analysis in European merger cases has increased substantially during the last decade. Both the merging parties and competition authorities now regularly attempt to use econometric analyses such as demand estimation and reduced form price analysis, to provide evidence on the possible effects of mergers and to test the plausibility of the theories of harm. Econometric analysis has largely been used to assess the possible unilateral effects of a merger rather than the possibility of coordinated effects. This is partly because unilateral effects are more susceptible to econometric analysis than coordinated effects, but it also reflects the increased focus on unilateral effects in European merger control over this period, especially in recent years. 2.

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