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Nice Theory But Where’s The Evidence: The Use of Economic Evidence to Evaluate Vertical and Conglomerate Mergers in the US and EU
Presentation to Merger Analysis in High Technology Markets Conference 2008. Mary T. Coleman, Managing Director, LECG (currently SVP Compass Lexecon).
Brief description of primary vertical theories of potential competitive concern from a merger. Input foreclosure. Customer foreclosure. Elements for a vertical theory to be plausible. Ability to foreclose. Incentive to foreclose. Foreclosure is likely to harm competition. Efficiencies do not offset. Evidence related to each element. Vertical Theories: As noted by the EU in their draft Guidelines, the two main theories of competitive harm related to vertical mergers are. Input foreclosure (upstream). Customer foreclosure (downstream). Input foreclosure: Firms with large upstream positions deny access to or increase of a key input to rival downstream firms, restricting competition downstream. Customer foreclosure: Firms with large downstream positions do not purchase key inputs from rival upstream firms, restricting competition upstream.
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