In recent years, concerns about transactions in the pharmaceutical sector harming innovation and competition through the discontinuation of overlapping drug R&D projects, so-called “killer acquisitions”, have prompted regulatory action and research. The objective of this study is twofold. First, the “fact-finding” challenge aims at assessing the pervasiveness and characteristics of the phenomenon of killer acquisitions. Second, the “evaluation” challenge aims to examine the Commission’s past efforts to address potential killer acquisitions, and the legal framework guiding the Commission’s actions.
Under the fact-finding challenge, the study collects publicly available evidence on a large sample of transactions occurring in the period 2014-2018, seeking to determine whether any may have led to a potential killer acquisition. The study is novel in that it assesses not only mergers and acquisitions, but also other types of transactions such as licensing deals and R&D cooperation agreements. In addition, the fact finding assessment goes beyond a statistical assessment of the probability of killer acquisitions by applying an approach whereby an initial large-scale and automated analysis is followed by a qualitative, case-by-case examination.
Out of a total of 6,315 transactions that were identified in the pharmaceutical sector in the period 2014-2018, information on the remit of the deal was available for 3,193 transactions. Out of these, 240 transactions involved the acquisition of potentially substitutable drug R&D projects, conservatively based on a narrow definition of competitive overlap. A significant proportion thereof (89 out of 240, or 37% of transactions) were followed by the discontinuation of one of the overlapping drug R&D projects and warranting further scrutiny, in the sense that – based on publicly available data – there was no clearly identifiable technical or safety reason explaining the discontinuation in question.
Under the evaluation challenge, the study first analyses how well the Commission’s substantive merger assessment dealt with five notified concentrations in the pharmaceutical sector. It finds that the Commission correctly assessed the killer acquisition theories of harm in these cases, with a suggestion for potential improvement in the remedy design. Then, it analyses the suitability of the merger and antitrust tools to deal with killer acquisitions which are not notified to the Commission, by simulating Art. 22 EUMR and Art. 101/102 TFEU assessments in two case studies. Past experience and a legal assessment suggest that Art. 22 EUMR (for concentrations) and Art. 101/102 TFEU (for non-concentrations) are valuable tools (albeit with limitations) to address such killer acquisitions.
“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).”
This paper presents a broad retrospective evaluation of mergers and merger decisions in markets dominated by multisided digital platforms. First, we document almost 300 acquisitions carried out by three major tech companies—Amazon, Facebook, and Google—between 2008 and 2018. We cluster target companies on their area of economic activity providing suggestive evidence on the strategies behind these mergers. Second, we discuss the features of digital markets that create new challenges for competition policy.
By using relevant case studies as illustrative examples, we discuss theories of harm that have been used or, alternatively, could have been formulated by authorities in these cases. Finally, we retrospectively examine two important merger cases, Facebook/Instagram and Google/Waze, providing a systematic assessment of the theories of harm considered by the UK competition authorities as well as evidence on the evolution of the market after the transactions were approved. We discuss whether the competition authority performed complete and careful analyses to foresee the competitive consequences of the investigated mergers and whether a more effective merger control regime can be achieved within the current legal framework.
The publication contributes to a better knowledge of the economic impact of this policy, which is essential for the good functioning of the internal market in the European Union. Competition authorities are increasingly interested in understanding the impact of their activities on markets and consumers. The goal is to improve competition policy rules and decision-making practices and to get robust evidence on the benefits of competition and competition policy for society as a whole. Discussions with competition authorities, practitioners and academics have shown the need to take stock of the experience gained in this field by the European Commission and to present it in an easily accessible way.
Paolo Buccirossi, Alessia Marrazzo and Salvatore Nava wrote two chapters concerning the T-Mobile/Orange UK Merger Case and the Telekomunikacja Polska Antitrust Case.
The Competition and Markets Authority appointed Lear to carry out a study aimed at looking at four past merger decisions in the digital sector taken by the Office of Fair Trading and the Competition Commission (jointly, the “Authorities”).
The objective of the study was threefold:
▪ review merger cases undertaken by Competition Authorities and the relevant economic literature to identify which Theories of Harm (ToHs) have been typically pursued in relation to these mergers, how such ToHs have been evaluated and which relevant economic features should be taken into account when evaluating mergers in the sector;
▪ assess the UK cases and evaluate whether the decision that the Authorities have come to was reasonable based on the evidence that was, or would reasonably have been, available at the time;
▪ evaluate market evolution following the mergers to ascertain whether the merger has led to a detrimental outcome.
The volume aims at providing a comprehensive view on competition law and consumer protection, also in light of the most recent case law. The volume also looks at the interaction between law and economics when it comes to competition matters. Paolo and Salvatore have written two chapters, one on the role of economics in merger control; and the other on the broader theme of the role of economics, and economists, within antitrust proceedings.
This presentation includes a qualitative and a quantitative analysis and examines the effect of the mergers on different dimensions of competition: price, product variety, provision of qualitative and ancillary services. Continue reading The effect of retail mergers on variety: An ex-post evaluation →
This study evaluates the appropriateness of some merger decisions undertaken by the Autoriteit Consument & Markt (ACM) in the Dutch grocery shopping sector. We analyze three related merger decisions published between 2009 and 2012 and involving major supermarket chains.
We conduct both a qualitative and a quantitative analysis and examine the effect of the mergers on different dimension of competition: price, product variety, provision of qualitative and ancillary services.
We estimated the effect on prices under both the assumption of local and national pricing. The results of our quantitative and qualitative analyses suggest that the three mergers did not impact prices. The effect on product variety, however, are less reassuring. According to our analyses, the last of the three mergers negatively impacted the depth of the product assortment offered by the merging parties and consumers had less choice.
We corroborate these findings by also econometrically testing if the issuance of the divestitures alleviated the negative effects on variety. The results obtained suggest that the divestiture only partially outweighed the reduction in variety caused by the mergers and that additional divestitures could have been needed.
The level of pre-merger notification thresholds is a matter of extreme importance to guarantee an effective and efficient merger review regime. On the one hand, the higher the thresholds the higher the risk of having potential anticompetitive mergers that might not be assessed by the relative authority. On the other hand, imposing notification to all mergers would be costly and inefficient for both the competition authority and the merging parties. This note presents an economic approach to set the optimal pre-merger notification threshold and provides some initial thoughts to fill the literature gap on the topic.
EU antitrust investigations involve a sequence of events which affect the investigated firm’s market value. We model these relationships and estimate their impact on firms’ share prices. On average, a surprise inspection reduces a firm’s share price by 2.89%, an infringement decision reduces it by 3.57%. The Court judgments do not have a statistically significant effect. Overall, we find that the total effect of the antitrust action ranges from -3.03% to -4.55% of a firm’s market value. Fines account for no more than 8.9% of this loss, and we conjecture that most of the loss is due to the cessation of illegal activities.
