FTC and U.S. DOJ Merger Enforcement Workshop,
Washington, DC, February 17-19, 2004.
Concentration Indices and Market Shares in
the EU Horizontal Merger Guidelines
Commission, DG Competition.
(*) The views expressed are those of the author and do not necessarily
reflect those of the European Commission
EC Merger Control - Background
- ED Horizontal Merger Guidelines published on 30.01.04.
- Guidelines complement the new EC Merger Regulation (adopted
- Both texts will become applicable as of 01.05.04.
- Background: reform of the ED merger control system (in place
- 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
Art. 2 ECMR
- 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"
EU Merger Guidelines
- 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
Market share indications
- 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
- Limited market share leads to presumption of compatibility.
An "indication to this effect": market share below 25%. (But:
does not cover co-ordinated effects)
- 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)
HHI indications (cont.)
- 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