UK merger control / Jonathan Parker and Adrian Majumdar ; consultant editor and contributor Simon Pritchard.
2011
KD2127 .P37 2011 (Map It)
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Details
Title
UK merger control / Jonathan Parker and Adrian Majumdar ; consultant editor and contributor Simon Pritchard.
Published
Oxford ; Portland, Or. : Hart Pub., 2011.
Call Number
KD2127 .P37 2011
ISBN
9781849460156 (cloth)
1849460159 (cloth)
1849460159 (cloth)
Description
lxix, 869 pages ; 25 cm
System Control No.
(OCoLC)687704500
Bibliography, etc. Note
Includes bibliographical references and index.
Record Appears in
Variant Title
United Kingdom merger control
Added Author
Table of Contents
Author's Preface
v
Editor's Preface
vii
Table of Cases
xxxiii
Table of Decisions
xxxvii
Table of Legislation
xlvii
1.
Overview Of The Uk Merger Control Regime
1
1.1.
Introduction
1
1.2.
The Fair Trading Act
2
1.2.1.
Overview
2
1.2.2.
Enforcement Authorities
3
1.2.3.
Jurisdictional Thresholds
4
1.2.4.
Review by the OFT
4
1.2.5.
In-depth Investigation by the CC
5
1.2.6.
The Public Interest Test
5
1.3.
Proposals For A New Merger Control Regime
6
1.3.1.
The Government's Consultation Document
6
(a).
Introduction
6
(b).
The introduction of a competition-based test
7
(c).
Independent competition authorities
8
(d).
Public interest cases
8
(e).
Special merger regimes
9
(f).
Pre-notification of mergers
9
(g).
Jurisdictional thresholds
10
1.3.2.
The Response to the Consultation on Proposals for Reform
10
(a).
The introduction of a competition-based test
11
(b).
Removing ministers from the decision-making process
12
(c).
Independent competition authorities
12
(d).
Public interest cases
12
(e).
Process and timetables
13
(f).
Jurisdictional thresholds
14
1.3.3.
The White Paper and the Enterprise Bill
15
(a).
The White Paper
15
(b).
The Enterprise Bill
16
1.4.
The Enterprise Act
18
1.5.
The Oft And Cc Merger Guidelines
19
1.6.
Decisions Of The Oft, The Cc And The Cat
20
1.7.
The Precedential Value Of Fta Cases
21
1.8.
The Merger Regulation
21
1.9.
The Office Of Fair Trading
22
1.10.
The Competition Commission
24
1.11.
The Secretary Of State
25
1.12.
The Competition Appeal Tribunal
26
1.13.
Sectoral Regulators
27
2.
Relevant Merger Situations: Enterprises Ceasing To Be Distinct
29
2.1.
Introduction
30
2.2.
Relevant Merger Situations
31
2.3.
The Oft's Evidentiary Standard
31
2.4.
The Definition Of An Enterprise
33
2.4.1.
Acquirer of Control
33
2.4.2.
Object of Control
34
(a).
The acquisition of an entire business or part of a business
34
(b).
The acquisition of an asset or a collection of assets that is not a standalone business unit
34
(c).
The distinction between assets and business activities
37
(d).
The acquisition of non-trading assets
38
(e).
The acquisition of components of an enterprise from different parties
40
2.4.3.
The Treatment of Leases
40
2.4.4.
The Formation of Joint Ventures
43
2.4.5.
Consideration
45
2.5.
The Concept Of Ceasing To Be Distinct
46
2.5.1.
Introduction
46
(a).
Three levels of control
46
(b).
A minimum level of material influence is required
46
(c).
More than one level of control in the same enterprise
46
2.5.2.
De Jure Control
47
2.5.3.
De Facto Control
47
(a).
Ability to exercise more than 50% of voting shares
48
(b).
Ability to influence a majority of votes
48
(c).
OFT discretion to treat de facto control as a controlling interest
49
(d).
Classification of de facto control
49
2.5.4.
Material Influence
49
(a).
Shareholdings exceeding 25%
50
(b).
Shareholdings between 15% and 25%
51
(c).
Shareholdings below 15%
52
(d).
Additional factors
54
(e).
Board representation without a shareholding
62
2.6.
Time Limits And Prior Notice
62
2.6.1.
The Four-Month Timing Rule
62
2.6.2.
The Starting Point for the Four-Month Period
62
2.6.3.
Facts in the Public Domain Must be Readily Ascertainable
63
2.6.4.
Extension of the Four-Month Period
64
2.7.
Successive Transactions
65
2.7.1.
Aggregating Transactions Within a Two-Year Period
65
2.7.2.
The Time at Which Enterprises Cease to be Distinct
66
2.7.3.
Options
66
2.7.4.
Only Mergers Between the Same Parties may be Aggregated
67
2.8.
Obtaining Control By Stages
67
2.8.1.
Changes in the Level of Control
67
2.8.2.
Acquisitions of Control Within a Two-Year Period
68
2.8.3.
Aggregation of Anticipated Mergers
68
2.9.
Temporary Merger Situations
68
2.10.
Associated Persons
69
2.11.
Particular Sectors
71
3.
Relevant Merger Situation: The Share Of Supply And Turnover Tests
73
3.1.
Introduction
74
3.1.1.
Overview
74
3.1.2.
Eligibility Thresholds
74
3.1.3.
Asset-Based Test Versus Turnover Test
75
3.1.4.
Level of the Turnover Test
75
3.1.5.
Market Share Test Versus Share of Supply Test
76
3.1.6.
OFT Discretion
76
3.2.
The Share Of Supply Test
76
3.2.1.
General Principles
76
(a).
A share of supply or acquisition
76
(b).
An increment is necessary
77
(c).
Not a market share test
77
(d).
Calculation of the share of supply
77
(e).
OFT analysis
78
(f).
Timing of the OFT's assessment
78
3.2.2.
The Supply of Goods or Services
78
(a).
Introduction
78
(b).
Horizontal markets
79
(c).
Vertical markets
80
(d).
Merchant and captive supply
81
(e).
Different types of supplier
82
(f).
Joint ventures
83
3.2.3.
Substantial Part of the UK
84
(a).
The meaning of a "substantial part" of the UK
84
(b).
Non-contiguous reference areas
89
(c).
Geographical nexus between the reference area and the area of potential substantive concern
91
3.2.4.
Geographical Allocation of Supply
91
3.3.
The Turnover Test
92
3.3.1.
Enterprises To Be Included in the Turnover Calculation
92
(a).
Transactions where at least one party remains under the same ownership and control
93
(b).
Transactions where none of the parties remains under the same ownership and control
93
3.3.2.
Calculation of Turnover
94
(a).
Ordinary activities
94
(b).
The relevant time-period
95
(c).
Adjustments to turnover in the preceding business year
95
(d).
Group turnover
95
(e).
Acquisition of part of a company
96
(f).
Exclusion of intra-group sales
96
(g).
Inclusion of aid
96
(h).
Geographical allocation of turnover
96
(i).
Successive transactions
97
(j).
Treatment of foreign currencies
98
3.3.3.
Rules for Specific Sectors
98
(a).
Credit and financial institutions
98
(b).
Insurance undertakings
98
4.
Relationship With The Merger Regulation
99
4.1.
Introduction
100
4.2.
Concentrations With A Community Dimension
101
4.2.1.
Concentration
101
4.2.2.
Community Dimension
102
4.3.
The Commission's Guiding Principles
103
4.3.1.
Overview
103
4.3.2.
More Appropriate Authority
103
4.3.3.
One-Stop Shop
104
4.3.4.
Legal Certainty
104
4.4.
Referrals From The Commission To The Oft
105
4.4.1.
Pre-Notification Referral Requests Under Article 4(4)
105
(a).
General principles
105
(b).
Legal requirements
105
(c).
Additional factors
106
(d).
Multiple referral requests
109
(e).
Partial referral requests
109
(f).
Factors considered by the OFT
110
(g).
Eligible transactions and action before filing Form RS
111
(h).
Form RS
111
(i).
OFT consideration of an Article 4(4) request
111
(j).
Commission decision on referral
111
(k).
OFT procedure following a referral back
112
(l).
Timing implications
113
(m).
OFT practice
114
(n).
Review of the Article 4(4) referral mechanism
115
4.4.2.
Post-Notification Referral Requests Under Article 9
116
(a).
General principles
116
(b).
Legal requirements
117
(c).
Partial referrals
120
(d).
Procedure and timing
120
(e).
OFT practice
122
(f).
Relationship between Article 9 and Article 4(4)
127
(g).
Review of the Article 9 referral mechanism
128
4.5.
Referrals From The Oft To The Commission
128
4.5.1.
Pre-Notification Requests Under Article 4(5)
128
(a).
General principles
128
(b).
Legal requirements
128
(c).
Procedure and timing
129
(d).
The OFT's use of its veto
129
(e).
Review of the Article 4(5) referral mechanism
130
4.5.2.
Post-Notification Requests Under Article 22
131
(a).
General principles
131
(b).
Legal requirements
132
(c).
Other factors
132
(d).
Procedure and timing
133
(e).
OFT practice
134
(f).
Review of the Article 22 referral mechanism
137
4.6.
Protection Of Legitimate National Interests
138
4.6.1.
General Principles
138
4.6.2.
Procedure and Practice
138
4.7.
Article 346 Tfeu
141
5.
Public Interest Mergers
5.1.
Introduction
143
5.1.1.
Overview
143
5.1.2.
Specified Considerations
143
5.1.3.
Public Interest Mergers
144
5.1.4.
Special Merger Situations
144
5.1.5.
European Merger Situations
145
5.2.
Public Interest Grounds
145
5.2.1.
Public Interest Considerations
145
5.2.2.
National Security
146
(a).
Introduction
146
(b).
Decisional practice
147
5.2.3.
Newspaper Public Interest Considerations
152
(a).
Introduction
152
(b).
Media Merger Guidance
152
(c).
Accurate presentation of news
153
(d).
Free expression of opinion
154
(e).
Plurality of views
155
(f).
Policy on intervention
156
5.2.4.
Media and Broadcasting Public Interest Considerations
158
(a).
Introduction
158
(b).
Definition of a media enterprise
159
(c).
Consideration of purchaser's track record
159
(d).
Assessment of media pubic interest considerations
159
(e).
Plurality of persons with control of media enterprises
160
(f).
Range of broadcasting
164
(g).
Commitments to the broadcasting standards objectives
164
5.2.5.
The Interest of Maintaining the Stability of the UK Financial System
166
5.3.
Public Interest Mergers
167
5.3.1.
General Principles
167
5.3.2.
The OFT's Role
168
5.3.3.
Process
168
5.3.4.
OFT Review Period
169
5.3.5.
OFT Report
169
5.3.6.
Report by OFCOM
171
5.3.7.
Secretary of State's Decision on Reference
171
5.3.8.
Reference to the CC
171
5.3.9.
Review by the CC
172
(a).
Completed mergers
172
(b).
Anticipated mergers
173
(c).
Additional questions
173
(d).
CC report
174
(e).
Restrictions where the public interest consideration has not been finalised
174
5.3.10.
Secretary of State's Decision
174
5.3.11.
Enforcement
175
5.4.
Special Public Interest Mergers
176
5.4.1.
General Principles
176
5.4.2.
Procedure
177
5.4.3.
OFT's Investigation and Report
177
5.4.4.
Secretary of State's Decision on Reference
177
5.4.5.
CC's Investigation and Report
178
5.4.6.
Secretary of State's Decision
178
5.5.
European Mergers And The Protection Of Legitimate Interests
178
5.5.1.
General Principles
178
5.5.2.
OFT's Investigation and Report
179
5.5.3.
Secretary of State's Decision on Reference
180
5.5.4.
CC's Investigation and Report
180
5.5.5.
Secretary of State's Decision
181
6.
The Office Of Fair Trading's Administrative Process
182
6.1.
Introduction
183
6.2.
Market Intelligence Function
184
6.2.1.
Statutory Duty
184
6.2.2.
Mergers Intelligence Officer
184
6.2.3.
Complaints
184
6.2.4.
Deterrence
185
6.2.5.
Own-Initiative Inquiries Resulting in References
186
6.3.
Enquiry Letters
186
6.3.1.
Decision to Send an Enquiry Letter
186
6.3.2.
Purpose of an Enquiry Letter
186
6.3.3.
Commencement of the OFT's Investigation and Timing
187
6.3.4.
Publication of a Decision
187
6.4.
The Decision To Notify A Merger
188
6.4.1.
Transactions Raising no Competition Concerns
188
6.4.2.
Transactions Raising Potential Competition Concerns
188
(a).
Initial undertakings
188
(b).
Unwinding a transaction or making significant divestments
189
(c).
Reduced period for the OFT's review
189
6.5.
Informal Advice
190
6.5.1.
Introduction
190
6.5.2.
Confidential Guidance
190
6.5.3.
The End of Confidential Guidance and the Postponement of Informal Advice
191
6.5.4.
Informal Advice
192
6.5.5.
Applications for Informal Advice
195
6.5.6.
Timetable
195
6.6.
Pre-Notification Contact
195
6.6.1.
The Purpose of Pre-Notification Contact
195
6.6.2.
The Appointment of a Case Officer
196
6.6.3.
The Benefits of Pre-Notification Contact
196
6.7.
Notification Of Mergers
197
6.7.1.
Introduction
197
6.7.2.
Mergers Must Not Be Confidential
198
6.7.3.
Good Faith Intention to Proceed
198
6.7.4.
Statutory Merger Notice
198
(a).
Statutory basis
198
(b).
Prescribed form
199
(c).
Timing
199
(d).
Automatic clearance and exceptions
199
(e).
Requirements
200
(f).
Prioritisation over informal submission cases
201
(g).
Rejection of a merger notice
202
(h).
Request for further information
202
(i).
Withdrawal of merger notice
203
(j).
Switch from merger notice to informal submission
203
6.7.5.
Informal Submissions
203
(a).
Introduction
203
(b).
Timing
204
(c).
Content of informal submissions
204
(d).
Completeness of submissions
206
(e).
Notification of an informal submission
206
(f).
False or misleading information
206
(g).
Confidentiality
207
6.7.6.
Fast Track Reference Cases
207
6.8.
Initial Undertakings And Orders
208
6.8.1.
Introduction
208
6.8.2.
The Purpose of Initial Undertakings
208
6.8.3.
When Initial Undertakings Come Into Force/Cease To Be in Force
208
6.8.4.
Situations of Integration Prior to Initial Undertakings Coming Into Force
209
6.8.5.
Timing of Initial Undertakings
209
6.8.6.
Threshold for Requiring Initial Undertakings
209
6.8.7.
Initial Undertakings Template
211
6.8.8.
Compliance Updates
212
6.8.9.
Waivers of Deviations From the Model Text
213
6.8.10.
Publication
213
6.8.11.
Frequency of Use
213
6.8.12.
Initial Enforcement Orders
214
6.9.
The Oft's Assessment Process
215
6.9.1.
Information-Gathering Powers
215
(a).
Completed mergers
215
(b).
Anticipated mergers
215
6.9.2.
Discussions With Merging Parties and Third Parties
216
(a).
Interaction with merging parties
216
(b).
Third party information
216
6.9.3.
The Decision-Making Process
218
(a).
State of play update
218
(b).
Period following the state of play update
218
(c).
Issues letter
219
(d).
Issues meeting
220
(e).
Case review meeting
220
(f).
Decision meeting
221
(g).
Draft decision
221
(h).
Publication of decisions
222
6.10.
Filing Fees
222
6.11.
Takeover Code
224
6.11.1.
Introduction
224
6.11.2.
Relevance of the Takeover Code to UK mergers
224
6.11.3.
Conditions to an Offer
224
6.11.4.
Timing Implications
225
(a).
Rule 2.4 announcements
225
(b).
Rule 2.5 announcements
226
6.12.
Ancillary Restraints
226
6.12.1.
Introduction
226
6.12.2.
The Principle of Self-Assessment
226
6.12.3.
Exceptional Circumstances
227
6.12.4.
OFT Assessment
227
7.
The Office Of Fair Trading's Duty To Refer And Exceptions To The Duty To Refer
230
7.1.
Introduction
230
7.1.1.
Overview
230
7.1.2.
Statutory Discretionary Exceptions
231
7.1.3.
No Discretion to Refer
231
7.2.
The Oft's Burden Of Proof
232
7.2.1.
The Duty to Refer
232
7.2.2.
The OFT's Original Interpretation of its Standard of Proof
232
7.2.3.
iSOFT/Torex
232
7.2.4.
IBA Health v. OFT
233
7.2.5.
OFT v. IBA Health
237
7.2.6.
The OFT's Amended Guidance
238
7.3.
Exceptions To The Duty To Refer
239
7.4.
Markets Of Insufficient Importance
240
7.4.1.
2003 Substantive Assessment Guidance
240
7.4.2.
2007 De Minimis Guidance
242
(a).
Increase in the de minimis threshold
242
(b).
Calculation of market size
242
(c).
Mergers likely to have a significant impact on competition
243
(d).
The three key variables
243
7.4.3.
Introduction of the Fourth and Fifth Variables
244
7.4.4.
Exceptions and Remedies Guidance
245
(a).
Introduction
245
(b).
Aim of the de minimis exception
245
(c).
Assessment framework for the application of the de minimis exception
246
(d).
Size of the markets at issue
247
(e).
Strength of the OFT's concerns
249
(f).
Magnitude of the competition lost by the merger
250
(g).
Durability of the merger's impact
252
(h).
Precedential implications, replicability and transaction rationale
253
(i).
Availability of undertakings in lieu
254
7.5.
Relevant Customer Benefits
257
7.5.1.
Customer Benefits
257
7.5.2.
Relevant Customer Benefits Versus Merger-Specific Efficiencies
257
7.5.3.
Relevant Customer Benefits and Undertakings in Lieu
259
7.5.4.
Evidential Requirements
259
7.5.5.
OFT Decisional Practice
260
7.6.
Mergers Insufficiently Advanced Or Unlikely To Proceed
262
7.7.
No Duty To Refer
262
8.
The Competition Commission's Administrative Process
264
8.1.
Introduction
264
8.2.
Terms Of Reference
265
8.3.
Cancellation Or Variation Of References
266
8.4.
Statutory Questions In Relation To Completed Mergers
266
8.5.
Statutory Questions In Relation To Anticipated Mergers
267
8.6.
Standard Of Proof
268
8.7.
Time Limits For Investigations And Reports
268
8.8.
Appointment Of A Merger Reference Group
269
8.9.
Merger Inquiry Staff
271
8.10.
Principal Steps In A Merger Inquiry
271
8.11.
Interim Undertakings And Orders
272
8.11.1.
Introduction
273
8.11.2.
Statutory Restrictions in Relation to Completed Mergers
273
8.11.3.
Statutory Restrictions in Relation to Anticipated Mergers
273
8.11.4.
Interim Undertakings
273
8.11.5.
Differences Between the OFT's Initial Undertakings and the CC's Interim Undertakings
274
8.11.6.
Adoption of Interim Undertakings From the OFT
274
8.11.7.
De Novo Interim Undertakings
275
8.11.8.
Interim Undertakings in Anticipated Mergers
275
8.11.9.
Interim Undertakings Template
276
(a).
Management of the target business
276
(b).
Compliance
277
8.11.10.
Interim Orders
277
8.11.11.
Appointment of a Monitoring Trustee or Hold-Separate Manager
278
8.12.
Information Gathering
280
8.12.1.
Introduction
280
8.12.2.
Initial Submission
280
8.12.3.
Questionnaires
281
8.12.4.
Third Party Submissions
281
8.12.5.
Hearings
282
8.13.
Information-Gathering Powers
283
8.13.1.
Introduction
283
8.13.2.
Powers
284
8.13.3.
Fines
285
8.14.
Issues Statement
285
8.15.
Provisional Findings
286
8.16.
Remedies Statement
288
8.17.
Final Reports
289
8.18.
Disclosure Of Information
289
8.18.1.
Core Documents
289
8.18.2.
Evidence and Announcements
290
8.18.3.
Confidentiality
290
9.
The Counterfactual
293
9.1.
Introduction
293
9.2.
The Authorities' Approaches To The Counterfactual
295
9.2.1.
The Approach to the Counterfactual at First-Phase
295
9.2.2.
The Approach to the Counterfactual at Second-Phase
296
9.3.
The Relevant Time-Period For Assessing The Counterfactual
297
9.3.1.
Introduction
297
9.3.2.
Consideration of Future Events
297
9.3.3.
Consideration of Past Behaviour
298
9.3.4.
A Two-Part Counterfactual
300
9.4.
Exiting Firm Scenarios
301
9.5.
The Failing Firm Defence
301
9.5.1.
The OFT's Approach to the Failing Firm Defence
303
(a).
The Failing Firm Guidelines
303
(b).
A cautious approach at first-phase
303
(c).
The two limbs of the failing firm defence
304
(d).
Inevitable exit of the target business
304
(e).
No realistic and substantially less anticompetitive alternative
304
(f).
The Merger Assessment Guidelines
305
(g).
Failing firm as the counterfactual or a defence to pre-merger conditions
305
(h).
Failing division defence
306
9.5.2.
The OFT's Decisional Practice
306
(a).
Introduction
306
(b).
Cases in which the OFT has accepted the failing firm defence
306
(c).
Inevitable exit of the target business
311
(d).
No less anti-competitive alternative purchaser
312
(e).
Exit of the target business as a less anti-competitive outcome
314
(f).
Application of the failing firm defence to only one part of the transaction
316
9.5.3.
The CC's Guidelines
317
(a).
The CC's approach under the Merger Reference Guidelines
317
(b).
The CC's approach under the Merger Assessment Guidelines
317
9.5.4.
The CC's Decisional Practice
318
(a).
Cases in which the CC has accepted the failing firm defence
318
(b).
Existence of less anti-competitive alternative purchasers
322
9.6.
The Exiting Firm Defence
323
9.7.
Scenarios Short Of Exit
324
9.7.1.
The Target as a Weakened Competitive Force in the Future
324
9.7.2.
The Target will not Exit the Market due to State Rescue
325
9.8.
Market Entry Or Expansion
326
9.9.
Market Exit
330
9.10.
Competing Bids
331
9.10.1.
OFT Approach
331
9.10.2.
CC Approach
332
9.11.
Parallel Transactions
332
9.11.1.
OFT Approach
332
9.11.2.
CC Approach
334
9.12.
Rail Franchise Bids
334
10.
Market Definition
336
10.1.
Introduction
337
10.1.1.
Legal Role and Practice Under the Enterprise Act
337
10.1.2.
Substantive Role and Conceptual Framework
338
10.1.3.
Market Definition as a Means to an End
339
10.2.
The Hypothetical Monopolist Test
342
10.2.1.
Introduction
342
10.2.2.
Relevant Markets and the Hypothetical Monopolist Test
342
10.2.3.
Use of the Hypothetical Monopolist Test
343
10.2.4.
A SSNIP Test Algorithm
344
10.2.5.
Narrow Versus Wide Markets and the Choice of SSNIP
345
10.3.
Product Market Definition: Demand-Side Substitution
348
10.3.1.
Product Characteristics
349
10.3.2.
Pricing Evidence
351
(a).
Introduction
351
(b).
Absolute price levels
351
(c).
Price correlation
352
(d).
Stationarity tests
354
(e).
Own-price and cross-price elasticities
355
(f).
Price discrimination and price sensitivity
356
10.3.3.
Switching Costs
357
10.3.4.
Critical Loss Analysis
358
10.4.
Product Market Definition: Supply-Side Substitution
362
10.5.
Other Issues In Product Market Definition
364
10.5.1.
Competitive Versus Prevailing Level SSNIP Tests
365
10.5.2.
Indirect Demand-Side Constraints
367
10.5.3.
Product Bundles
370
(a).
Aftermarkets
370
(b).
Òne-shop' purchasing
371
10.5.4.
Two-Sided Markets
372
10.5.5.
Asymmetric Constraints
372
10.5.6.
Chains of Substitution
373
10.5.7.
Innovation and Product Life-Cycles
374
10.5.8.
Branded and Own-Label Products
375
10.6.
The Authorities' Approach To Product Market Definition
378
10.6.1.
Introduction
378
10.6.2.
Undifferentiated Products
379
10.6.3.
Differentiated Products
380
10.6.4.
The CC's Approach to Product Market Definition
382
10.7.
Geographic Market Definition
383
10.7.1.
Introduction
383
10.7.2.
Hypothetical Monopolist Test
384
10.7.3.
Factors Considered in Geographic Market Definition
385
10.7.4.
Sensitivity of Share Data to the Geographic Market Definition Employed
385
(a).
UK-wide versus wider than national
385
(b).
UK-wide versus regional or local
386
10.7.5.
Transport Costs
386
10.7.6.
Point-to-Point Transport Flows
387
10.7.7.
Chains of Substitution
388
10.7.8.
Import and Trade Flows
390
10.7.9.
Regional Markets
391
10.7.10.
Local Markets
392
(a).
Mergers involving national chains of local stores
393
(b).
The OFT's "standard approach" to local market definition where customer data are available
395
(c).
The OFT's approach where customer data are not available
398
(d).
The OFT's application of its "standard approach"
399
(e).
The ̀80% rule' does not apply to all sectors
399
11.
Concentration Measures And Screens
403
11.1.
Introduction
403
11.2.
Measures Of Concentration
405
11.2.1.
Market Shares
405
(a).
Basic principles: combined share and increment
405
(b).
Small increments in market share: ̀mavericks' and other ̀plus' factors
406
(c).
Calculating market shares
410
(d).
Interpreting market shares
412
(e).
The ̀binary fallacy'
415
11.2.2.
The S̀ignificant Competitor' Set or ̀Fascia Count'
416
(a).
Introduction
416
(b).
Mergers of large full-range retailers or s̀uperstores'
418
(c).
Mergers of s̀pecialist' retailers
421
(d).
Mergers of chains or ̀mainstream' suppliers vs. ìndependents'
424
11.2.3.
HHIs
427
11.2.4.
Concentration Ratios
428
11.3.
Generic Screens And Thresholds
428
11.3.1.
The 40% Share Screen For Unilateral Effects, Undifferentiated Markets
428
11.3.2.
The Default 5 to 4 Screen for Multiple-Overlap Retail Cases
429
11.3.3.
A 5 to 4 and 40% Combined Screen for All Horizontal Cases?
431
(a).
A generic 5 to 4 screen?
431
(b).
Combined with a 40% screen?
433
(c).
Conclusion
434
11.3.4.
The 30% Screen For Non-Horizontal Theories
435
11.4.
Hhi Screens
435
11.5.
Sector-Specific Screens And Thresholds
436
12.
Unilateral Effects
437
12.1.
Introduction
439
12.1.1.
Unilateral Effects in Differentiated Product Markets
440
(a).
Unilateral effects and the merged firm
440
(b).
Market-wide ǹon-coordinated' or ̀multilateral' effects
441
(c).
Dynamic responses and efficiencies
442
12.1.2.
Unilateral Effects in Undifferentiated Product Markets
442
12.1.3.
Issues in Business-to-Business (Intermediate) Markets
443
12.1.4.
The Rise of Economics and Effects- Based Decisional Practice
445
(a).
SLC vs. Dominance
445
(b).
Structural analysis vs. closeness of substitution analysis
449
12.2.
Unilateral Effects In Retail Markets
451
12.2.1.
Unilateral Effects in the Setting of Textbook Models of Differentiated Products
451
(a).
The Bertrand model
451
(b).
Pre-merger equilibrium
451
(c).
Post-merger equilibrium
452
(d).
Upward pricing pressare
452
(e).
Illustrative price rises
453
(f).
Other models of product differentiation
454
(g).
Dynamic responses ignored by static models of product differentiation
455
12.2.2.
Overview: The Approach of the Merger Assessment Guidelines
455
12.2.3.
Describing Closeness of Substitution: Close, Closer, Closest
457
(a).
What is a close substitute?
457
(b).
Measuring closeness
458
(c).
Results predicted by market shares as a benchmark for closeness
459
(d).
Ranking and relativity: particularly close and closest substitutes
460
(e).
Symmetric and asymmetric patterns
462
(f).
Uniquely close substitutes
463
12.2.4.
Sufficient Remaining Competition? Captive Post-Merger Customers and Òffer' Discrimination Scenarios
465
(a).
Non-targeted reduction in retail offer: Tesco/Slough
466
(b).
Targeted degradations in the store offer in retail markets: GAME/Gamestation
469
(c).
Intersecting national and local issues
472
12.2.5.
Post-Merger Repositioning and Range Extension by Rivals
473
12.2.6.
Quantitative Indicators: Margins and Diversion Ratios
477
(a).
Margins and the Lerner condition
478
(b).
Diversion ratios between the merging firms
482
(c).
Diversion ratios to non-merging firms
486
12.2.7.
Specific Price Pressure Indices and Tests
487
(a).
Gross upward pricing pressure index
488
(b).
Illustrative price rises with symmetric demand
492
(c).
Upward pricing pressure
495
(d).
Intervention thresholds with GUPPI and IPRs
496
(e).
Where next?
498
12.2.8.
OFT Retail Cases Without Diversion Ratio Data
498
12.2.9.
OFT's Direct Inferences From Diversion Ratios in Retail Cases
501
12.2.10.
The Somerfield Presumption in Grocery Cases
503
(a).
The creation of the IPR-based presumption in Somerfield/Morrison's
504
(b).
OFT practice 2006-9
510
(c).
Asymmetries and Efficiencies: Asda/Netto (2010)
514
12.2.11.
The OFT's Rebuttable Presumption in Non-Grocery Cases (2008-10)
516
(a).
Creation of the presumption in LoveFilm/Amazon and HRG/Focus
517
(b).
Later cases (2008-10)
523
12.2.12.
Recent CC Retail Cases Using Diversion Ratios and Margins
525
(a).
Waterstone's/Ottakar's
525
(b).
Sports Direct/JJB Sports
527
(c).
Zipcar/Streetcar
528
12.2.13.
Current Status of Thinking on Retail Market Definition
530
(a).
Use of narrow(est) SSNlP-test market definition
530
(b).
Use of broad, industry-accepted or intuitive market definitions
531
12.2.14.
Current Status of Thinking on the Ǹew Approach'
531
(a).
Sunset of the rebuttable presumption?
531
(b).
Margins and diversion ratios at the OFT and CC
533
12.3.
Supplier Mergers In Intermediate Markets
536
12.3.1.
Introduction
536
12.3.2.
Undifferentiated Products and Quantity Competition
537
(a).
Introduction
537
(b).
The output reduction theory of harm
537
(c).
The Cournot model --- competition in quantities with undifferentiated products
538
(d).
Illustrative price rises in a Cournot setting
540
(e).
Case studies
542
12.3.3.
Markets With Bidding Processes
547
(a).
Introduction
547
(b).
Firms with identical products but different costs
548
(c).
Product differentiation
548
(d).
Case studies
549
12.3.4.
Negotiated Prices
552
(a).
Introduction
552
(b).
Diversion ratios and price pressure tests in differentiated intermediate markets
554
(c).
Case studies
556
12.4.
Mergers Impacting On Procurement Markets
561
12.4.1.
Competitive Effects of Buyer Mergers
561
(a).
Definitions of buyer power
561
(b).
Beneficial and harmful effects of buyer mergers
563
(c).
Raising rivals' costs and related theories of harm
563
12.4.2.
Merger Assessment Guidelines
565
12.4.3.
Authorities' Decisional Practice
565
(a).
Travis Perkins/BSS
565
(b).
Stongegate/Deans
566
(c).
Waterstone's/Ottakar's
568
12.5.
Elimination Of A Potential Entrant
568
12.5.1.
Introduction
568
12.5.2.
Assessment
569
12.5.3.
Decisional Practice
570
12.6.
Closeness Of Substitution: Empirical Techniques And Tests
572
12.6.1.
A Selective Note on Empirical Techniques
573
(a).
Introduction
573
(b).
Estimating own and cross-price elasticities of demand
574
(c).
Selective issues in estimation
575
(d).
Competition Commission best practice guidelines
578
12.6.2.
Evidence on Functionality
581
12.6.3.
Customer Survey Evidence
582
(a).
Surveys in retail stores
582
(b).
Consumer survey design issues
584
(c).
Specialist surveys and consumer panels
588
(d).
Suggested best practice for submissions of technical economic analysis from parties
590
12.6.4.
Natural Experiments
590
(a).
Promotions
591
(b).
Entry/exit
592
(c).
Temporary production outage
593
(d).
Other firm or market-wide shocks
594
12.6.5.
Overlap vs. Non-Overlap Area Tests
594
(a).
Comparing prices in overlap and non-overlap areas
594
(b).
Comparing range and service quality in overlap and non-overlap areas
596
12.6.6.
Price and Margin Concentration Studies
597
(a).
Price concentration
597
(b).
Margin concentration
598
(c).
Authorities' commentary on retail mergers
599
12.6.7.
Win/Loss Analysis
600
12.6.8.
Inferences on Competition Amongst Manufacturers Drawn From Retail Level Data
601
12.6.9.
Merger Simulation
605
(a).
Simulation procedure
606
(b).
Calibrating the model
607
(c).
Simulation with a Bertrand model of differentiated products
608
(d).
Sensitivity of results
609
(e).
Efficiencies and remedies contexts
610
13.
Coordinated Effects
613
13.1.
Introduction
614
13.2.
The Economics Of Coordinated Effects
615
13.2.1.
Definition of Coordinated Effects
615
13.2.2.
Overview of Necessary Conditions for Coordination
615
13.2.3.
The Economics of Collusion --- Outline of the Basic Model
616
13.2.4.
The Economics of Collusion --- Key Concepts
618
(a).
The economics definition of collusion is not the same as the legal definition
618
(b).
How do firms set the collusive price?
619
(c).
How do firms choose a punishment strategy?
619
(d).
Explicit communication does not make collusion inevitable
620
13.2.5.
Internal Stability
621
(a).
Overview
621
(b).
Transparency
621
(c).
Punishment strategies
623
(d).
Ambiguous factors
624
(e).
Limitations in economic theory
624
13.2.6.
External Stability
625
13.2.7.
The Collusion Checklist
626
13.2.8.
Effect of a Merger on the Scope for Coordination
630
(a).
Types of coordinated effects
630
(b).
How might a merger make collusion more sustainable or more harmful?
632
13.2.9.
Simulating Coordinated Effects
634
13.3.
The Merger Assessment Guidelines
635
13.3.1.
The Authorities' Tests Prior to the Merger Assessment Guidelines
635
(a).
The OFT's test
635
(b).
The CC's test
636
13.3.2.
Definition of Coordinated Effects
638
13.3.3.
Three Conditions for Coordination
638
13.3.4.
Ability to Coordinate
639
(a).
Overview
639
(b).
Number of competitors
640
(c).
Degree of complexity in the market
640
(d).
Monitoring competitors
644
(e).
Structural links
646
13.3.5.
Internal Sustainability
647
(a).
Factors relevant to internal sustainability
647
(b).
Credible punishment mechanism
647
(c).
Symmetry of market shares and cost structures
649
13.3.6.
External Sustainability
652
(a).
Overview
652
(b).
Competitive fringe
652
(c).
Barriers to entry
654
(d).
Countervailing buyer power
656
(e).
Existence of a maverick
658
13.3.7.
Causation
659
13.3.8.
Pre-Existing Coordination
660
13.3.9.
Tacit or Explicit Coordination
662
13.3.10.
Coordinated Effects or Unilateral Effects
664
13.4.
The Authorities' Decisional Practice
664
13.4.1.
DS Smith/LINPAC
665
(a).
Merger overview
665
(b).
OFT decision
666
(c).
CC decision
667
13.4.2.
Wienerberger/Baggeridge
669
(a).
Merger overview
669
(b).
OFT decision
669
(c).
CC decision
671
13.4.3.
BOC/Ineos
674
(a).
Merger overview
674
(b).
OFT decision
675
14.
Non-Horizontal Mergers
677
14.1.
Introduction
677
14.2.
Vertical Mergers
678
14.2.1.
Efficiencies Resulting From Vertical Mergers
679
14.2.2.
The Requirement for Market Power
680
(a).
Merger Assessment Guidelines
680
(b).
Authorities' decisional practice
680
14.2.3.
A Framework for Assessing Input and Customer Foreclosure
681
14.2.4.
Input Foreclosure
682
(a).
Introduction
682
(b).
Economics of input foreclosure
683
(c).
Total Input Foreclosure
683
(d).
Partial input foreclosure
686
(e).
Assessing input foreclosure
686
(f).
Assessing an input foreclosure strategy as an abuse of dominance
689
(g).
Countervailing constraints to input foreclosure
690
14.2.5.
Customer Foreclosure
692
(a).
Introduction
692
(b).
Merger Assessment Guidelines
692
(c).
Foreclosure strategies
693
(d).
Ability to foreclose customers
694
(e).
Incentive to foreclose customers
695
(f).
Effect on competition
696
14.2.6.
The Vertical Effects of Horizontal Mergers
697
14.2.7.
The Authorities' Decisional Practice
699
(a).
Foreclosure of incumbent rivals: EWS/Marcroft
699
(b).
Foreclosure of multiple potential entrants: Deutsche Borse/Euronext/LSE
702
(c).
Foreclosure of a unique potential entrant: Ticketmaster/Live Nation
707
14.3.
Conglomerate Mergers
714
(a).
Introduction
714
(b).
Merger Assessment Guidelines
715
(c).
An assessment framework for considering conglomerate mergers
715
(d).
Economic theories of anti-competitive tying and bundling
715
(e).
Authorities' decisional practice
718
14.4.
Diagonal Mergers
721
15.
Countervailing Constraints
723
15.1.
Introduction
723
15.2.
Market Entry And Expansion
724
15.2.1.
Introduction
724
15.2.2.
Types of Barriers to Entry/Expansion
725
15.2.3.
Timeliness of Entry/Expansion
726
15.2.4.
Likelihood of Entry/Expansion
726
15.2.5.
Sufficiency of Entry/Expansion
727
15.2.6.
Evidence
728
15.2.7.
The Authorities' Approach to Entry/Expansion
729
15.3.
Buyer Power
733
15.3.1.
Introduction
733
15.3.2.
Single Customers With Buyer Power
733
15.3.3.
Groups of Customers With Buyer Power
735
15.3.4.
Buyer Power and the de minimis Exception
736
15.4.
Efficiencies
737
15.4.1.
Introduction
737
15.4.2.
Supply-Side Efficiencies
738
15.4.3.
Demand-Side Efficiencies
740
15.4.4.
Evidencing Efficiencies and the Standard of Proof
742
15.4.5.
The Authorities' Approach to Efficiencies
743
16.
Undertakings In Lieu Of Reference
746
16.1.
Introduction
746
16.2.
Procedural Principles
748
16.2.1.
The OFT's Statutory Duty
748
16.2.2.
OFT Decisions on Undertakings
748
16.2.3.
Merging Parties Must Propose Undertakings
749
16.2.4.
Deadline for Submitting Undertakings
750
16.2.5.
Near-Miss Cases
751
16.2.6.
Suspension of the Duty to Refer
752
16.2.7.
Agreement of Provisional Undertakings
753
16.2.8.
Public Consultations
753
16.2.9.
̀Fix-it-First' Undertakings
754
16.2.10.
Undertakings Template
755
(a).
Effective date
755
(b).
The divestment business
755
(c).
Approval of a purchaser and terms of divestment
756
(d).
Appointment of a trustee
757
(e).
The trustee's mandate
757
(f).
Continued separation
757
(g).
Interim action
758
(h).
Compliance
758
(i).
Provision of information
759
16.3.
Substantive Assessment Of Undertakings
759
16.3.1.
Undertakings Must Be Clear-Cut
759
16.3.2.
Undertakings Must Comprehensively Remove the Competition Concerns
761
16.3.3.
Undertakings Must Be Proportionate
762
16.3.4.
Undertakings Must Usually Be Structural
762
16.3.5.
Undertakings Must Not Require Significant Additional OFT Monitoring
763
16.3.6.
Undertakings Must Not Raise Competition Concerns
764
16.3.7.
Divestments Must Be Made to a Suitable Purchaser
764
16.3.8.
Merging Parties May Need to Offer a Range of Possible Remedies
767
16.4.
Up-Front Buyers
767
16.4.1.
Introduction
767
16.4.2.
The OFT's Order-Making Power Where Undertakings Are Not Fulfilled
768
16.4.3.
Advantages to Using the Up-Front Buyer Mechanism
768
16.4.4.
Application of the Up-Front Buyer Mechanism to Part of a Remedies Package
770
16.4.5.
Time-Period for Identifying a Buyer
771
16.4.6.
The OFT's Practical Application of the Up-Front Buyer Mechanism
772
16.5.
Oft Study Of Deterrence Effect Of Remedies
778
16.6.
Structural Remedies
779
16.7.
Behavioural Remedies
783
17.
Second-Phase Remedies
785
17.1.
Introduction
785
17.2.
Remedies Process
787
17.2.1.
Introduction
787
17.2.2.
Notice of Possible Remedies
787
17.2.3.
Draft Undertakings and Modifications
788
17.2.4.
Acceptance of Final Undertakings
789
17.2.5.
Divestment Period
789
17.2.6.
Divestment Trustee
789
17.2.7.
Monitoring Trustee
790
17.2.8.
Up-Front Buyers
790
17.2.9.
Orders
791
17.2.10.
International Constraints
791
17.3.
Framework For Assessing Remedies
792
17.3.1.
Introduction
792
17.3.2.
Remedial Options
792
17.3.3.
Effectiveness
792
17.3.4.
Costs
793
17.3.5.
Proportionality
793
17.3.6.
Relevant Customer Benefits
794
17.4.
Structural Remedies: Prohibition
795
17.4.1.
Introduction
795
17.4.2.
Decisional Practice
795
17.5.
Structural Remedies: Divestments
800
17.5.1.
Introduction
800
17.5.2.
Divestment Risks
800
17.5.3.
Identifying a Divestment Package
801
17.5.4.
Divestment of an Existing Business
801
17.5.5.
Decisional Practice
802
17.6.
Structural Remedies: Intellectual Property And Sponsored Entry
805
17.6.1.
IP Remedies
805
17.6.2.
Sponsored Entry
806
17.7.
Behavioural Remedies
807
17.7.1.
Introduction
807
17.7.2.
Risks Related to Behavioural Remedies
808
17.7.3.
Types of Behavioural Remedies
809
17.7.4.
Enabling Measures
809
17.7.5.
Controlling Measures
810
17.7.6.
Decisional Practice
810
17.8.
Mixed Structural And Behavioural Remedies
813
18.
Judicial Review
816
18.1.
Introduction
816
18.1.1.
The Change in Regime Effected by the Enterprise Act
816
18.1.2.
Practice to Date
817
18.2.
Appealable Decisions Before The Cat
818
18.2.1.
The Basic Provisions of Section 120
818
18.2.2.
The Meaning of "Decision"
818
18.2.3.
Decisions Preceding a Final Decision
819
18.3.
The Residual Scope For Appeals Before The Administrative Court
821
18.4.
Who Can Appeal?
823
18.4.1.
A "Person Aggrieved" Before the CAT
823
18.4.2.
"Sufficient Interest" Before the Administrative Court
824
18.5.
Time Limits For Appeal
825
18.5.1.
CAT Proceedings
825
18.5.2.
Administrative Court
826
18.6.
Basic Grounds For Review
827
18.6.1.
Judicial Review Generally
827
18.6.2.
Ground #1 Illegality/Error of Law
828
18.6.3.
Ground #2 Irrationality/Unreasonableness
829
18.6.4.
Ground #3 Proportionality
831
18.6.5.
Ground #4 Procedural unfairness
832
18.7.
Scope And Intensity Of Review
833
18.7.1.
Burden and Standard of Proof
833
18.7.2.
Ability to Adduce New Evidence
835
18.7.3.
Intensity of Review: the Formal Legal Position
835
18.7.4.
Intensity of Review: Assessment of the CAT's Practice
838
18.8.
Powers Of The Courts Following A Successful Appeal
840
18.8.1.
Powers of the CAT
840
18.8.2.
Powers of the Administrative Court
840
18.9.
Selected Procedural Issues
841
18.9.1.
CAT Proceedings
841
(a).
Notice of appeal
841
(b).
Defence
841
(c).
Amending the notice of appeal
841
(d).
Interventions
842
(e).
Interim relief
842
(f).
Case management and directions
842
(g).
Evidence and disclosure
843
(h).
Confidentiality
843
(i).
Costs
844
18.9.2.
Administrative Court
844
18.9.3.
Further Appeals
845
(a).
Appeal from a CAT judgment
845
(b).
Appeal from Administrative Court judgment
845
Index
847