The best way to begin an economic analysis is to ask a relevant question. In a merger analysis the relevant question is: will the post-merger new entity have the ability and the incentive to exert a higher market power? But which analyses are best suited to answer these questions? This note argues that the best way to make this call is to understand first how firms compete in the market, something economists refer to as the “mode of competition”. In the context of merger control, the identification of the mode of competition can improve both the identification of the relevant antitrust economic question(s) and of the most adequate economic analyses to answer the question(s). The note has been inspired by Lear’s recent engagement with the Competition and Consumer Commission of Singapore (CCCS), for the review of the proposed merger between Korea Shipbuilding & Offshore Engineering Co., Ltd. (KSOE) and Daewoo Shipbuilding & Marine Engineering Co., Ltd. (DSME). As part of the assignment, Lear has been asked to provide a critical assessment of the adequacy of the economic evidence submitted by the merging parties that, indeed, was not appropriate given the mode of competition in the industry (i.e., it provided an answer to the wrong economic question).
The Lear Competition Note is available here
Read more on our engagment here