This document is available in three formats: this web page (for browsing content) and PDF (comparable to original document formatting). To view the PDF you will need Acrobat Reader, which may be downloaded from the Adobe site. For an official signed copy, please contact the Antitrust Documents Group.

FTC and U.S. DOJ Merger Enforcement Workshop,
Washington, DC, February 17-19, 2004.
European Union's flag - blue with a circle of gold stars

Concentration Indices and Market Shares in the EU Horizontal Merger Guidelines



Vincent Verouden

European Commission, DG Competition.

(*) The views expressed are those of the author and do not necessarily reflect those of the European Commission

1


EC Merger Control - Background European Union's flag - blue with a circle of gold stars

  • ED Horizontal Merger Guidelines published on 30.01.04.
  • Guidelines complement the new EC Merger Regulation (adopted on 20.01.04).
  • Both texts will become applicable as of 01.05.04.
  • Background: reform of the ED merger control system (in place since 1990).
  • On the substantive side, the two main issues underlying this reform were:

      Scope of the existing "dominance" test (Art. 2 ECMR)?: "SLCvs. dominance: does it make a difference?"
      Role of efficiencies in merger analysis

2


Art. 2 ECMR European Union's flag - blue with a circle of gold stars

  • Existing test: whether a merger "creates or strengthens a dominant position as a result of which effective competition would be significantly impeded"

      Perceived by some commentators as not covering all mergers that produce anti-competitive effects (e.g., mergers in oligopolistic markets where the new entity would only become the No. 2 in the market)

  • New test: whether a merger "would significantly impede effective competition, in particular as a result of the creation or strengthening of a dominant position"

3


EU Merger Guidelines European Union's flag - blue with a circle of gold stars

  • Complement the change in the test
  • Set out the analytical approach
  • Central question: will the merger enhance the level of market power, i.e. lead to increased prices or other harm to consumers?
  • Distinction: unilateral effects and co-ordinated effects
  • Unilateral effects may arise, in particular, when the merger leads to a dominant position

      In such cases, single firm dominance "typically" associated with the new entity having an appreciably larger market share than the next competitor post-merger

4


Market share indications European Union's flag - blue with a circle of gold stars

  • Very large market shares - 50% or more - may in themselves be evidence of the existence of a dominant market position

      Further, it is noted that the Commission has in "several cases" found dominant positions with market shares in 40-50% range, and in "some cases" with shares below 40%

  • Limited market share leads to presumption of compatibility. An "indication to this effect": market share below 25%. (But: does not cover co-ordinated effects)

5


HHI indications European Union's flag - blue with a circle of gold stars

  • In addition, Commission "unlikely to identify competition concerns" when

      HHI < 1000 (such cases normally do not require extensive analysis)
      1000 < HHI < 2000 and delta < 250
      HHI > 2000 and delta < 150

  • "Soft Safe Harbour" approach (also consistent with 25% market share indicator)
  • HHI indications not applicable where certain special circumstances are present which make HHI less informative (see next slide)

6


HHI indications (cont.) European Union's flag - blue with a circle of gold stars

  • Special circumstances, e.g.

    • Merger involves potential or recent entrant
    • One or more merging parties important innovators
    • Significant cross-shareholdings among market participants
    • One of merging firms a "maverick"
    • Indications of past or ongoing coordination, or facilitating practices
    • A merging party pre-merger has market share above 50%

  • By using this technique, HHI indications more informative in relation to the application of the merger control standard under "normal" circumstances. List also pedagogic by itself

7