An analysis of an impact of competition policy on a selected market

Ing. Tomáš Houška, Ph.D.

Doctoral thesis

Abstract:

Recent trends in competition policy emphasize the significance of post-merger assessment studies. Such studies are important especially in cases, in which competition agencies actively intervened in the market and either blocked a certain merger or imposed some set of remedies. Reviewing these merger decisions later in time can determine their efficiency and identify, whether there was a more appropriate way to reach the economic objective of merger regulation. Recognizing weaknesses in merger-review process is desirable as it improves the efficiency of future merger decisions issued by the competition authority. Using a case study of P&G/Gillette merger from 2005, I conduct an ex-post merger assessment evaluating the efficiency of structural remedies imposed by the Federal Trade Commission (FTC) in the analysed merger. The empirical research in this thesis investigates outcomes of several potential sets of remedies assuming different divested assets and different acquirers of those assets. By comparing these scenarios, the most efficient set of remedies are identified and compared it to the remedies issued by the FTC in the P&G/Gillette merger. Using a structural model based on nested-logit demand and Bertrand model with differentiated products to simulate different market equilibria, I find that the merger decision issued by the FTC was very close to the most efficient outcome possible, some questions however remain.

Abstract:

Recent trends in competition policy emphasize the significance of post-merger assessment studies. Such studies are important especially in cases, in which competition agencies actively intervened in the market and either blocked a certain merger or imposed some set of remedies. Reviewing these merger decisions later in time can determine their efficiency and identify, whether there was a more appropriate way to reach the economic objective of merger regulation. Recognizing weaknesses in merger-review process is desirable as it improves the efficiency of future merger decisions issued by the competition authority. Using a case study of P&G/Gillette merger from 2005, I conduct an ex-post merger assessment evaluating the efficiency of structural remedies imposed by the Federal Trade Commission (FTC) in the analysed merger. The empirical research in this thesis investigates outcomes of several potential sets of remedies assuming different divested assets and different acquirers of those assets. By comparing these scenarios, the most efficient set of remedies are identified and compared it to the remedies issued by the FTC in the P&G/Gillette merger. Using a structural model based on nested-logit demand and Bertrand model with differentiated products to simulate different market equilibria, I find that the merger decision issued by the FTC was very close to the most efficient outcome possible, some questions however remain.

Keywords

Competition policy, merger regulation, remedies, efficiency, merger simulation models

Language used: English

Date on which the thesis was submitted / produced: 18. 9. 2014

Thesis defence

• Date of defence: 4. 3. 2015
• Supervisor: doc. Ing. Zdeněk Tomeš, Ph.D.
• Reader: Prof. Dr. Peter Hackl, Prof. Dr. Klaus Gugler

Masaryk University

Faculty of Economics and Administration

Doctoral programme / field:
Economic Policy and Administration (4-years) / Economic Policy