Abstract
In this paper we present the difference-in-differences methodology implemented by the Romanian Competition Council in the second half of 2013. The analysis was conducted to evaluate the ex-post impact of a merger in the Romanian retail market, authorised by the competition authority in November 2010. In the merger review process, we identified five potentially problematic locations (the treatment group), and selected accordingly representative time intervals and product categories (11). We also defined a suitable group of other stores (the control group) to be used as a benchmark in our analysis. The implementation of the difference-in-differences technique through regression analysis rendered 55 case estimates, of which 49 match the departing hypotheses and are thus considered reliable. In each of these cases we estimated the percentage change in the price of a product category in a given store, due to merger clearance. Our results indicate that the approved merger has not led to general price increases: in 36 of 49 cases the merger impact on prices is not statistically significantly different from zero and only three of the 49 cases show price increases. Moreover, there are significantly more situations where the prices for certain product category-store combinations decreased following the merger (ten such cases). Consequently, it appears that the Romanian Competition Council’s decision to clear the merger in November 2010 was the right approach.
Highlights
This paper provides a broad overview of the analysis conducted by the Romanian Competition Council in the second half of 2013, following the authorization of a merger in the retail sector at the end of 2010
The importance of the ex-post assessment of a merger decision stems from its main objective, which is to evaluate whether the aims of the decisions of the competition authority were reached or not
It is essential that a competition authority can verify if a decision has achieved the goal that justifies the existence of the merger control policy
Summary
This paper provides a broad overview of the analysis conducted by the Romanian Competition Council in the second half of 2013, following the authorization of a merger in the retail sector at the end of 2010. As Jiménez and Perdiguero (2012) point out, the number of papers using the DiD approach to analyse the effects of mergers has grown in recent years According to these authors, most of the studies using this methodology concluded that prices increased as a result of the merger (they provide several examples of studies reporting significant price hikes). Empirical merger analysis of the retail sector seems to go in two main directions, with lively debates between the two approaches: on the one hand, some papers build structural models of demand and supply in order to simulate merger effects using pre-merger data, whereas, on the other hand, some papers use both pre- and post-merger data on prices to directly estimate the effects of the structural changes and mergers.. Empirical merger analysis of the retail sector seems to go in two main directions, with lively debates between the two approaches: on the one hand, some papers build structural models of demand and supply in order to simulate merger effects using pre-merger data, whereas, on the other hand, some papers use both pre- and post-merger data on prices to directly estimate the effects of the structural changes and mergers. The latter is the one we took in our analysis
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