EU ANTITRUST: HOT TOPICS & NEXT STEPS

EU ANTITRUST: HOT TOPICS & NEXT STEPS 2022

Prague, Czechia

Efficiency may limit the risk of coordination effects on the relevant market, as confirmed by the European Commission in the Airtours/First Choice decision. The core issue is that efficiency relates to the future, and unpredictable events are extremely difficult not only to estimate but also to prove ( Airtours/First Choice ). 7. Conclusion Horizontal mergers are not prohibited per se , although they may restrict competition in the same way as cartels. Article 2 of Regulation 139/2004 is based on the assumption that horizontal mergers are allowed if they do not distort effective competition. If the evidence collected in the course of merger proceedings allows antitrust authorities to conclude that the merger will significantly impede competition in the relevantmarket, such a transaction shouldbe prohibited. Itmeans that merger causes or strengthens dominance or leads to harming competition in a way of unilateral or coordinated effects. It results in lower competitive pressure and in consequence generate e.g., price increases in the relevant market, reduced portfolio products of merged companies, lower innovation rates etc. The theory of unilateral effects shows that any horizontal merger will lead to higher prices in the relevant market when there is no competitive pressure. However, not all price increases significantly distort competition. In this respect, it is important for all parties to the merger control proceedings to have tools to predict or simulate the effects of a merger and its diffusion on the relevant market. An essential role in assessing unilateral effects is played by relationships between competitors; however, the very theory of such effects is not precise, and it is difficult to find unambiguous results of the analysis. Similar problems accrue when assessing coordinated effects. One of the assessment tools is the efficiency of a merger that should offset negative effects. The question again remains of to what extent the efficiency would mitigate the detrimental effects of the transaction. In practice, it would not be reasonable to assume that the positive effects of a merger must always exceed the negative ones. One of useful tools seems to be the SSNIP test, used not only to assess the relevant market but also to verify mixed demand elasticity in that market and then to predict price changes. However, the SSNIP test is based on the ceteris paribus principle, and it does not examine current competitors price movements as a response to expected price increases of the combined entity. Therefore, merger assessment needs to be based mostly on well-known quantitative tool as Herfindahl Harshman Index. It would not be appropriate to base the merger assessment on qualitative criteria, as due to the difficult access to data, there is a risk of an erroneous result and, consequently, unjustified blocking of transactions.

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