THE POTENTIAL FOR SIGNIFICANT INACCURACIES IN MERGER SIMULATION MODELS

This paper considers the role that merger simulation modelsshould play in European merger control. The use of these models,as off-the-shelf instruments to assess the economic effectsof mergers, has become increasingly widespread in recent years.However, contrary to some claims, merger simulation models donot allow investigators to avoid much of the competitive effectsanalysis relating to the relevant economic market, nor do theynecessarily provide more precision to merger control. Withoutunderstanding the limitations of such models and the circumstancesunder which they can and should be usefully applied, they maynot just be useless, but dangerous in the sense of providingpossibly spurious results with spurious claimed accuracy. Thispaper argues that any merger simulation models used should be"bespoke" models, rather than off-the-shelf models, but cautionsthat even bespoke models will frequently not be as useful asis often claimed. This is not to deny that there are occasionswhen well-constructed bespoke models are genuinely useful anddo offer genuine improvements in merger control.     

THE INTERPLAY OF MORAL NORMS AND INSTRUMENTAL INCENTIVES IN CRIME CAUSATION*

Rational choice theories (RCTs) of crime assume actors behave in an instrumental, outcome-oriented way. Accordingly, individuals should weight the costs and benefits of criminal acts with subjective probabilities that these outcomes will occur. Previous studies either do not directly test this central hypothesis or else yield inconsistent results. We show that a meaningful test can be conducted only if a broader view is adopted that takes into account the interplay of moral norms and instrumental incentives. Such a view can be derived from the Model of Frame Selection (Kroneberg, 2005) and the Situational Action Theory of Crime Causation (Wikström, 2004). Based on these theories, we analyze the willingness to engage in shoplifting and tax fraud in a sample of 2,130 adults from Dresden, Germany. In line with our theoretical expectations, we find that only respondents who do not feel bound by moral norms show the kind of instrumental rationality assumed in RCTs of crime. Where norms have been strongly internalized, and in the absence of neutralizations, instrumental incentives are irrelevant.     

THE CUSTOMER IS SOMETIMES RIGHT: THE ROLE OF CUSTOMER VIEWS IN MERGER INVESTIGATIONS

Antitrust enforcement officials and practitioners generallyagree that customers should have a prominent role in the mergerreview process. The question of the appropriate level of reliancethat competition authorities and courts should give to customertestimony has been the subject of considerable debate sincethe Arch Coal and Oracle decisions. This paper contains a comprehensivediscussion of the use of customer testimony throughout the U.S.merger review process, from the initial merger notificationfiling to injunction proceedings in federal court. We discussthe benefits from and problems with the use of customer testimony,including how these problems have led to litigation losses forthe U.S. antitrust authorities. What is the appropriate roleof customer testimony and when is it most probative? We contendthat customers can provide investigators and judges with informationregarding several relevant issues in an acquisition, includingindustry structure, geographic and product demand substitution,and acceptance of potential market entrants. In contrast, customerswill have considerably less information relevant to the likelihoodof entry, the extent of any merger-specific efficiencies, andthe validity of a failing firm defense. They will almost neverbe qualified to offer legal conclusions, such as the propermarket definition or likely competitive effects of a proposedmerger. We conclude that courts have generally remained consistentin their reliance on customer testimony, including in the ArchCoal and Oracle cases, and that customer testimony, despiteits limitations, should and will continue to be important ateach stage of the merger review process.     

USING RETAIL DATA FOR UPSTREAM MERGER ANALYSIS

The typical situation that antitrust authorities face is toanalyze a proposed manufacturer merger using scanner data atretail level. I start with a benchmark model of manufacturers'and retailers' sequential pricing behavior. Then I perform counterfactualexperiments to explore the relationship between downstream retailerpricing models and the resulting estimates of upstream mergers,in the absence of wholesale prices. Looking at scanner datafor the ground coffee category sold at several retail chainsin Germany, I find that not considering retail pricing explicitlywhen analyzing the potential consequences of an upstream mergerresults in simulated changes in welfare that are significantlydifferent given the underlying model of retail pricing behavior.These findings are relevant for competition policy, and authoritiesshould consider incorporating the role of retailers in upstreammerger analyses, especially in the presence of increasinglyconsolidated retail food markets.     

WELFARE STANDARDS, SUBSTANTIVE TESTS, AND EFFICIENCY CONSIDERATIONS IN MERGER POLICY: DEFINING THE EFFICIENCY DEFENSE

For several years already, the efficiency defense (and its incorporationin the law) has been a much debated issue in merger policy.When discussing the introduction of an efficiency defense inmerger control, it is important to define clearly its contentand interpretation. However, different approaches to the conceptof efficiency defense exist in the literature, and it is notalways clear which jurisdictions apply an efficiency defense.Therefore, to improve communication and comparison between jurisdictions,it would be useful to reach agreement on the exact content ofan efficiency defense. This paper proposes to define the efficiencydefense along two dimensions: a conceptual one—relatedto the welfare standard—and a procedural one—relatedto the application of the substantive test. The main conclusionof this paper is that the concept of efficiency defense canonly be appropriately applied under a total welfare standardand if efficiencies can be directly balanced against the anticompetitiveeffects of mergers on a case-by-case basis. Using this definition,only in Canada and Australia (formal review process) would anefficiency defense exist.