THE TYRANNY OF MARKET SHARES: INCORPORATING SURVEY-BASED EVIDENCE INTO MERGER ANALYSIS
In merger reviews, regulators such as the Department of Justice (DOJ) and the Federal Trade Commission (FTC) in the US, or the Directorate-General for Competition (DG Comp) of the European Commission, frequently lean heavily on public or internal measures of revenue or unit shares when evaluating potential competitive effects. The regulators use these traditional measures of market share not only in the consideration of market definition and potential market power, but also to understand how much competitive discipline each party to a merger places on the other, and hence, whether a merger might remove competitive constraints from the market and lead to price increases.
However, in some instances traditional share measures may reflect overly broad or overly narrow market definitions, or may simply be a poor reflection of the current extent of competition. Traditionally tracked industry reports may be insufficient or insufficiently detailed to accurately define an antitrust market, measure market shares, or determine each firm’s next best substitute. In these instances, the regulators’ view of market definition or of potential competitive effects of a proposed merger can be clouded, rather than clarified, by a reliance on traditional industry reports.
Parties and regulators have begun to recognise the need to expand the view of competition by looking beyond traditionally tracked market shares and focusing more deliberately on the consumers’ and businesses’ underlying purchasing processes. For example, in order to try to account for consumers purchasing from both online and brick-and-mortar retailers, as part of the review of the 2016 Fnac/Darty merger, the French Competition Authority and the parties each extended the traditional retail market share analysis to allocate online sales to local geographic markets.
Jul-Sep 2018 issue
Analysis Group