Vertically challenged

Vertically challenged

A guide to the competitive effects of vertical mergers

With the publication of its non-horizontal merger (NHM) guidelines in 2007, the European Commission (EC) sought to put the competition assessment of vertical and conglomerate mergers on a more economic footing. This article discusses the economic analysis that has subsequently been employed in recent decisions, and the outstanding issues that the authorities in Europe have not yet needed to address.

Whilst cases such as TomTom/TeleAtlas have analysed the ability and incentive to foreclose rivals, dealing with the ‘vertical arithmetic’, none have prompted the full competitive effects analysis that is required when these two pre-conditions are in fact met. The challenge of determining whether a vertical merger would ultimately harm consumers, notwithstanding a degree of foreclosure being expected, has yet to be put to the test.

 

Vertically challenged