Market Definition Research Articles

Merger Policy and the 2010 Merger Guidelines

New Horizontal Merger Guidelines were issued jointly by the Antitrust Division and the Federal Trade Commission in August, 2010, replacing Guidelines issued in 1992 that no longer reflected either the law or government enforcement policy. The new Guidelines are a striking improvement. They are less technocratic, accommodating a greater and more realistic variety of theories about why mergers of competitors can be anticompetitive and, accordingly, a greater variety of methodologies for assessing them. The unifying theme of the Horizontal Merger Guidelines is to prevent the enhancement of market power that might result from mergers. The 2010 Guidelines state that “[a] merger enhances market power if it is likely to encourage one or more firms to raise price, reduce output, diminish innovation, or otherwise harm customers as a result of diminished competitive constraints or incentives.” The focus on enhancement of market power is not limited to price. Both the 1992 and 2010 Guidelines expressed a concern about mergers that might restrain innovation, but the emphasis in the 2010 Guidelines is greatly expanded.The agencies are increasingly concerned about excessive reliance on market definition mechanisms that are, at best, rough approximations of reality. This increases the relative weight that will be given to other factors. That is not to suggest that the Agencies will not employ technical methodologies. Indeed, the economic methodologies for delineating markets have become more technical and precise over time, thanks in large part to economists that have been working on merger analysis, whether independently or under the aegis of one of the Agencies. Rather, the Guidelines indicate a broader range of approaches. Under the 2010 Guidelines market definition essentially plays two roles: “First, [it] helps specify the line of commerce and section of the country in which the competitive concern arises. . . . Second, [it] allows the Agencies to identify market participants and measure market shares and market concentration.” Market definition (and the measuring of market shares and concentration) is no longer an end in itself, though it is “useful to the extent it illuminates the merger’s competitive effects.” The 2010 Guidelines also place a heavier emphasis on direct evidence of competitive effects in defining markets: “[e]vidence of competitive effects can inform market definition, just as market definition can be informative regarding competitive effects.”This essay attempts to integrate the 2010 Guidelines into merger enforcement policy in the United States, highlighting the most important differences between the approach taken in the 2010 Guidelines and that taken by both previous Guidelines, the enforcement agencies, and the courts.

Practical Applications of Frontier Market Investing: Active Versus Passive

Frontier markets are increasingly attracting attention from investors, with more than 30 active frontier managers in the field, along with a handful of passive managers who track the indexes. Larry Speidell of Frontier Market Asset Management examines the trade-offs in choosing active or passive managers in these new and less developed markets and provides insights on topics ranging from market definition and efficiency to access and performance.

Extraterritorial Criminal Jurisdiction under the Antitrust Laws

The Ninth Circuit may soon consider whether challenges to antitrust activity that occurs abroad must invariably be addressed under the rule of reason, which will make criminal prosecution difficult or impossible.When antitrust cases involve foreign conduct, the courts customarily appraise its antitrust significance only after deciding whether the Sherman Act reaches the activity. Nevertheless, jurisdictional and substantive inquiries are not wholly independent. Both reflect two sound propositions: that Congress did not intend American antitrust law to rule the entire commercial world and that Congress knew that domestic economic circumstances often differ from those abroad where mechanical application of domestic antitrust decisions would make little economic, political, or social sense.The purpose of the distinction between the per se rule and rule of reason is to identify and distinguish situations where anticompetitive can be assessed at relatively low administrative costs from those that require more complete analysis. The Ninth Circuit has spoken of a jurisdictional rule of reason. However, merging considerations of comity, foreign interests, and domestic from extraterritorial conduct into questions about market definition and competitive impact unnecessarily complicates a set of queries that are already sufficiently complex and are in fact quite different from one another.One rationale for expansive reach when foreign anticompetitive activity causes domestic injury is that the sovereign representing purchasers typically has a greater interest than the sovereign representing sellers. A cartel in one country fixing the price of goods for export transfers wealth away from the territory containing the buyers and toward the territory containing the sellers. Sovereigns, including the United States, have typically been less concerned with condemning restraints on export trade where all the buyers are foreign than with restraints on imports. This aspect of United States policy is reflected in the Foreign Trade Antitrust Improvements Act (FTAIA) as well as the Restatement (Third) of the Foreign Relations Law of the United States. At the same time, however, the effects query takes on additional relevance in cases involving extraterritorial conduct, because legislative jurisdiction under the Commerce Clause or statutory reach under the Sherman Act or FTAIA require some harmful effect in the United States. Thus, for example, a naked cartel abroad can be made subject to a criminal indictment and per se treatment. However, the government must show a sufficient effect justifying invocation of United States law. Nevertheless, requiring this effect is quite different from requiring full rule of reason treatment for naked cartel activity.

Features of Small Economies and Price Regulation

The Market definition is an essential ingredient to competitive and regulatory analysis. There has been increasing discussions in the recent years concerning the particularities of small economies in the context of price regulation. Fiji is a small open economy that is remote from all major markets. Small economies and territories are demonstrably more vulnerable to both natural and economic disasters. They are generally unable to produce or grow industries that can compete in international trade because their costs tend to be structurally much higher. The publicly stated goal of almost all regulation to is to improve the well being of the public. The reasons for regulation might include something like “regulation is needed to protect the public”. The traditional economic explanation for regulation is that markets sometimes fail to maximize welfare and therefore government intervenes to attempt to make society better off. The special features of small economies are addressed followed by the regulatory options in regulating the overall price levels. We will examine the rate of return regulation which is widely used by many countries to regulate prices and derive unit costs of the service. Price cap regulation and benchmarking (or yardstick) to set prices is also discussed. The paper further outlines the relevance of these issues in regulating the overall price level in small economies and how incentives are related to the regulation of the overall price level of the service provider.

보완제품의 시장획정을 위한 임계매출감소 분석: 골판지원지 담합사건에의 적용

보완제품의 시장획정을 위한 임계매출감소 분석: 골판지원지 담합사건에의 적용

시장획정을 위한 가격 시계열 분석: 골판지원지 담합사건에의 적용

시장획정을 위한 가격 시계열 분석: 골판지원지 담합사건에의 적용

Assessing Innovation Effects in US Merger Policy: Theory, Practice, Recent Discussions, and Perspectives

Despite a broad consensus about the importance of also considering innovation effects of mergers (in addition to the usual price effects), it is still very unclear to what extent and how innovation effects of mergers should be assessed. In this paper, the results of the first comprehensive (quantitative) empirical study on how the US antitrust authorities DoJ and FTC assessed mergers in regard to their innovation effects from 1995 to 2008 are presented. We could find 135 challenged mergers with overall 323 relevant markets, in which the authorities had also innovation concerns. Whereas in Kern/Dewenter/Kerber (2014) we have focused much more narrowly on the econometric results, this paper (in section 3) presents all our results (in a non-technical way) and analyzes them in the broad context of the theoretical discussion about innovation effects of mergers (section 2) and the recent discussion on how to deal with innovation effects in regard to the reform of the U.S. Horizontal Merger Guidelines (chapter 4). In our empirical study, we are mainly interested in the question to what extent the agencies have assessed innovation effects within the traditional product market concept or by using a more innovation-specific approach which would consider research and development already in the market definition (along basic ideas of the innovation market analysis). Important results of our study are: In more than a third of all challenged mergers also innovation concerns were raised - with no differences between the agencies and over time. However, the agencies used rather different assessment approaches, the DoJ more the traditional product market concept and the FTC more an innovation-specific approach; however, overall an innovation-specific approach was used more often. We also analyzed the cases for the applied concentration measures and levels, barriers to entry, the reasonings of the agencies, simultaneity of static price effects claims, and remedies. Our overall results are very ambivalent: The agencies have assessed innovation effects and this often also in an innovation-specific way, but they did not succeed to develop a clear and consistent approach and seemed to have gotten more cautious over time. In chapter 4, these results are confronted with the recent US antitrust discussion about the reform of the U.S. Horizontal Merger Guidelines. Both this discussion as well as the new Guidelines shows a clear reluctance of adopting a more innovation-specific approach (by sticking clearly to the product market approach) which is at odds with the practice of the agencies until 2008. This disappointing result leads the authors to develop some ideas for new research perspectives on this issue.

MITIGATING LOAN REPAYMENT TROUBLES DURING MICROFINANCE EXPANSION: EVIDENCE FROM A LARGE PANEL

(ProQuest: ... denotes formulae omitted.)1.INTRODUCTIONOne of the core objectives of microfinance institutions (MFIs) is the provision of banking/financial services to non-traditional customers known as poor and low-income households or businesses. A significant challenge facing these institutions is the struggle for financial self-sufficiency. This means controlling most of the risks in the loan portfolio through adequate loan collection and timely loan repayments. Doing so, provides for further extension of funds to other borrowers, resulting in further outreach and development (Crabb and Keller, 2006).Examining this challenge in the presence of uncontrolled is of importance, since fast microfinance could pose substantial strain on MFIs' mission, making it harder for them to operate sustainably in such an unconventional market structure. In addition, the 2004-2008 surge in microfinance provides a great opportunity to test this hypothesis.There is a paucity of empirical work on the effects of the unprecedented rapid microfinance expansion that occurred between 2004 and 2008. Practitioners have speculated that this phase in microfinance activities has led to increased loan delinquency. According to Gonzalez (2009), the increase in the number of borrowers during the expansion averaged 21 percent per year while loan portfolio jumped by a staggering 34 percent per year on average.Chen et al. (2010) and Stephens (2009) examine some of the emerging economies qualified as high growth markets and show that in 2008, these markets1 experienced devastating loan delinquency rates. These studies feed into the narrative that aggressive in microfinance lending may pose higher credit risk to MFIs as loan recovery efforts become more challenging. Chen et al. (2010) identified key contributing factors to poor loan repayment rates among which microfinance is mentioned. However, they present no empirical evidence.In this paper, we use a new and improved proprietary comprehensive dataset that includes a large cross-section of MFIs to estimate the effect of rapid microfinance expansion on loan delinquency. The use of such a comprehensive data mitigates that kind of measurement error that plague many microfinance studies (missing data) and allows us to estimate linear panel models. Given that the effects of microfinance expansion may not be visible during the boom years (2004-2008), we extend our dataset from 2003 to 20132 to include post-boom years. For proper identification of the effect of microfinance expansion on loan delinquency, we control for aspects of microfinance (micro) and beyond-microfinance (macro) design.2.DETERMINANTS OF LOAN REPAYMENTLoan repayment is the most revealing of the five3 performance areas of a MFI (Rosenberg, 2009). So, the ability to collect loans is critical to the success of MFIs. We use the loan loss rate to proxy loan repayment.... (1)The loss loan rate measures how well a MFI collects its loans and our presumption is that higher values of loan loss rate are associated with lower repayment rates.To measure the impact of microfinance on loan delinquency, it is important to control for factors that may explain changes in loan repayment. The choice of control variables is motivated by the literature. We hypothesize that loan repayment is influenced by the of lending,4 the percentage of female borrowers,5 other (micro) institutional factors6 such the personnel allocation ratio (percent of staff devoted to credit control), the quality of prudential regulation, the quality of technical assistance, operational self-sufficiency, financial intermediation and credit risk (portfolio at risk more than 30 days) and macroeconomic variables7 (GNI per capita rate and inflation) that may affect the ability of the MFI to recover loans.Following the Microfinance Information Exchange (MIX) Market definition, operational self-sufficiency is calculated as follows:. …

Achieving Symbiosis between Disruptive Innovation and Merger Control: Challenges and Remedies

Disruptive innovation is increasingly gaining attention in the antitrust world. However, arguably, competition authorities have been slow in adjusting their tools to address the far-reaching effects of disruption. Due to the ex ante nature of merger analysis, dealing with disruptive innovation becomes even more challenging in mergers. Furthermore, when disrupters are acquired at an early stage, notifiability thresholds are rarely triggered due to lack of turnover. This paper first attempts to clarify the notion of disruptive innovation and its economics and policy implications. The following sections address the challenges of disruption in merger control, starting with the definition of the relevant product market and the search for an analytical framework. The paper then explores cases where disruptive innovation was considered to be a positive factor in the clearance decision (‘disruptive innovation as a shield’) and evaluates whether these decisions are built upon solid ground. The final section analyses the acquisitions of disrupters by incumbents (‘disruptive innovation as a sword’). The overall finding is that competition authorities have various flexible tools that can be used to effectively analyse the disruption phenomenon in merger control. The ultimate goal of this paper is to provoke further thinking and research on how competition law enforcement can better accommodate disruptive innovation.

TESTING JUSTIFICATION FOR SEGMENT BASED RELEVANT PRODUCT MARKET DEFINITION IN MERGER CONTROL: EVIDENCE FROM TURKEY

In this paper, we aim to investigate whether different segments of beer products can constitute a separate relevant product market within the framework of competition law. This question gained importance when the merger between Anheuser-Busch InBev and SABMiller became subject to a Phase II investigation by the Turkish Competition Authority in March 2016, which ultimately ended with an unconditional clearance decision, based on an intact “beer” market, recognizing that the relevant product market regarding beer brands in Turkey must be wider than the premium segment. To answer the research question above concerning relevant product market definition, we implement a Hypothetical Monopolist Test in two steps. In the first step, the aggregate price elasticity of demand for the premium segment is estimated econometrically by using a nested logit demand model. This model tests whether products in the same group are closer substitutes than products in different groups. We conclude that the correlation of beers within the same group is not statistically significant. Since the data in our study are obtained at the retail level, the price elasticity of demand at the brewer level is derived from the estimate at the retailer level by using very conservative assumptions with regard to the pass-through rates. In the second step, the hypothetical monopolist test is implemented by using the critical elasticity which is calculated by using the profit margins for the premium beer segment at brewer/supplier level under both 5 percent and 10 percent SSNIP. It is seen that the actual elasticity of demand for the premium segment is larger than the critical elasticity (in absolute value) under both scenarios. These findings show that the relevant product market regarding beer brands in Turkey must be wider than the premium segment.

CAN ONE (EVER) ACCURATELY DEFINE MARKETS?

The ongoing debate about the role of market definition in antitrust cases addresses the usefulness and correct application of the Hypothetical Monopolist Test (HMT) as defined by the U.S. Department of Justice and the Federal Trade Commission in the Horizontal Merger Guidelines. These guidelines intend to identify the techniques that those agencies use to evaluate the potential anticompetitive effects of a merger. In this article, I examine the accuracy of the HMT. In applying the HMT, I consider two separate models. In each model, one knows the true extent of the product market. First, I apply the HMT in a linear differentiated demand model with n firms that each produce one symmetrically differentiated product, and derive conditions whereby m products would be considered to comprise a product market. I find that the test consistently underestimates the number of products in the relevant market in that setting, and the resulting relevant product markets are arbitrary subsets of the actual product market. The second model uses a quasi-linear utility specification, where the products enter the utility function additively. The only interaction between the two products occurs through the income effects of the budget constraint. Under certain conditions, the smallest possible product market as defined by the HMT must include at least one producer of the other product. Therefore, depending on the underlying parameters of the utility function, the HMT might either overestimate or underestimate the size of the relevant product market, sometimes producing purely arbitrary results.

The Effects of Piracy on Competition: Evidence from Subscription TV

Competition studies that focus on antitrust issues (e.g. market definition, market power) are typically conducted in markets where all firms are assumed to operate legally (competitors are tax-abiding entities, pay for all inputs used in their production process, have paid the proper government licenses to do so, etc.). We investigate competition issues in a market characterized by widespread piracy: subscription TV in Peru. Estimates suggest that 50% of subscription TV users in Peru (30% in Latin America) use an illegal provider. We make use of a unique dataset in which households provided crucial information regarding the (il)legality of their paid TV supplier. Using quantitative antitrust tools based on demand estimation techniques we study the impact that the presence of the informal sector has on competition. Our estimates suggest that the illegal operators constitute a close substitute for (and henceforth significantly constraint the pricing power of) legal operators. This finding can have important antitrust implications: the failure to account for piracy could lead to erroneous conclusions regarding market power measurement and the delineation of the relevant (antitrust) market. This may be particularly important in several industries (especially in the developing world) where the leading operator may be cataloged as “dominant” only in the absence of illegal providers.

Market definition as value reconciliation: the case of renewable energy promotion under the WTO Agreement on Subsidies and Countervailing Measures

The interrelationship between renewable energy support policies and World Trade Organization (WTO) law is an important recent manifestation of the challenge to reconcile environmental and economic values in contemporary societies. This article strives to contribute to the discussion by using the intersection between policies to support renewable energy, in particular sustainable biofuels in the EU, and the WTO’s Agreement on Subsidies and Countervailing Measures as a case study. The article discusses how efforts to promote renewable energy seem to have become contingent upon the core legal notion of ‘relevant markets’. The article further claims that this contingency is problematic: renewable energy markets are highly complex in practice, and combined with the WTO’s convoluted interpretations of ‘relevant markets’, the legal outcomes struggle to find the proper balance between appropriate support for sustainability and the prevention of protectionist market fragmentation.

Market Definition Changes the Story: Competition and Price Dispersion in the Airline Industry Revisited

We analyze the effect of competition on price dispersion in the airline industry and show that the outcome hinges on redefining the extent of a market. Using panel data from 1993 to 2013, an increase in competition has a positive effect on price dispersion in one-way markets but a negative effect in round-trip markets. This is driven by a bigger (smaller) decrease in the 10th percentile of the price distribution in the one-way (round-trip) markets. We provide suggestive evidence that airlines compete more aggressively in the lower tail of the price distribution in one-way markets due to higher markups.

Starting Antitrust Anew The Alternative Cornerstone

Market definition, the three-decade-old cornerstone of antitrust analyses, has always been extremely challenging in practice. It requires pinpointing, or approximating fairly accurately, hypothetical responses to hypothetical increases of hypothetical prices by hypothetical monopolies. Not surprisingly, the methodology has been heavily criticized for its impracticability and uncertainty. It has even been suggested that its outcome is not much more than a guess. To add to its impracticability and uncertainty, in 2010, in a seminal article, Professor Kaplow pointed to several theoretical shortcomings of the methodology, and proved it entirely illogical. Consequently, as has been observed, “the handwriting is on the wall for market definition”. The problem is that “to this day, no one has advanced anything better”. The object of this Paper is to offer an alternative. Surprisingly, I show that a simple snapshot of historic price differentials accomplishes all that market definition could have ever hoped to accomplish. The process overcomes all of the theoretical flaws that traditional market definition suffers from, and is an easy-to-employ technique, that requires no convoluted formulae, time-consuming analyses, or expensive data collection. Overlooked until now, this quick, easy, cost-effective method, that builds on easily-obtained data, can serve as an alternative to market definition as the starting point for most antitrust analyses. The policy implications of the novel suggestion made in the Paper are far reaching – it may revolutionize the practice of antitrust law.

A Note on Market Definition, Segmentation, and Targeting: Three (of Four) Steps in Developing Marketing Strategy

Marketing strategy, part of the marketing planning process, flows directly from a company's goals and helps define how the marketing organization will help the firm achieve its objectives. Marketing strategy is guided by the goals and objectives of the organization, the business unit, or the particular product or service for which the plan is developed. The choice of which marketing strategy (or strategies) to pursue then guides the marketing mix decisions, which, taken together, become the value proposition offered to the target market segment(s). Marketing strategy involves four steps, and this note addresses the first three. Excerpt UVA-M-0895 Rev. Oct. 23, 2017 A Note on Market Definition, Segmentation, and Targeting: Three (of Four) Steps in Developing Marketing Strategy Marketing Strategy Marketing strategy, part of the marketing planning process, flows directly from a company's goals and helps define how the marketing organization will help the firm achieve its objectives. As a result, marketing strategy is guided by the goals and objectives of the organization, the business unit, or the particular product or service for which the plan is developed. The choice of which marketing strategy (or strategies) to pursue then guides the marketing mix decisions (i.e., the product, distribution, promotion, and price decisions), which, taken together, become the value proposition offered to the target market segment(s). Understanding how the plan impacts the firm financially is the last step in the marketing planning process. . . .

Market Definition in Two-Sided Markets: An Empirical Analysis

Market Definition in Two-Sided Markets: An Empirical Analysis

The Several Internal Markets

The 'four freedoms' in EU law are locked together by Article 26 TFEU, which declares that the internal market ‘shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties’. But those freedoms are divisible. More than that: they are divided. In truth the EU has several internal markets. Its market for goods is different from its market for services and different again from its market for people. I have written elsewhere of the ambiguous character of the internal market (Weatherill, The Internal Market as a Legal Concept (OUP, 2016): this paper is more concerned to focus on the points of heterogeneity that attend the law of the internal market. It shows (in Section III) that the Court of Justice has refused to adopt an overtly common approach to the determination of when a measure that applies equally in law and in fact is properly placed beyond the reach of the free movement provisions – the Keck conundrum – and it has adopted an inflated reading of the incursion of EU law into practices that do not arise in the context of an obstruction of cross-border mobility in the particular case of dependent children of third country nationals. Moreover the personal scope of the free movement provisions is not aligned: those concerning goods do not bind private parties, those concerning persons and services do. Section IV explores the pattern of legislative harmonisation, and it demonstrates that across the many sectors that have been the subject of harmonisation the precise patterns according to which primary and secondary law combine reveal myriad different models. Moreover the acquis is marked by a great many instances of sanctioned variation of many different types – geographical, material, personal, temporal and so on. Section V looks to legislative activity beyond the programme of harmonisation. It reveals a number of legal bases which are explicitly tied to the internal market, most of which are simply sector-specific iterations of the basic assumptions associated with market-making harmonisation, but it finds other legal bases such as social policy and cohesion which are not declared to operate in the service of the internal market yet which plainly have some (contested) connection to it. This shows that the EU’s internal market, as a bargain or a package deal, is surprisingly lacking in precise legal definition or boundary. Section VI examines provisions which place off limits activities that are apt to harm the internal market but finds that this may have little relevance in practice: the treatment of enhanced co-operation by the legislative institutions and by the Court is emblematic. The internal market also has a presence beyond the EU’s external frontiers. The EEA, examined in Section VII and sometimes – though without legal foundation – termed the ‘single market’, takes on most, though not all, of the baggage of the internal market, and the political and judicial institutions of EFTA seek normally, but not inevitably, to bring EEA law into conformity with EU law. Section VIII considers the EU’s Association Agreements. These are less ambitious than the EEA and their scope typically excludes matters such as the free movement of persons, but even where their provisions replicate those familiar within the EU legal order, they are not always interpreted to mean the same thing. The rules of the internal market are exported but diluted. So there is a broad band of possible internal markets, ranging from one which is radically decentralized as a result of a choice in favour of unrestricted inter-jurisdictional competition to, at the other extreme, one which is radically centralized in the sense that lawmaking competence has been completely stripped away from the constituent units in favour of the central authority. From one extreme to another there exists a huge range of options, and the many internal markets found across the globe are far from homogenous. But even within the EU itself one can find heterogeneity - one finds several internal markets. The paper is not about Brexit: it is about the definition of the internal market. But Brexit has brought into focus that troublingly imprecise definition, and some of the confusion about hard and soft versions of Brexit stems from the absence of a secure anchor for the debate, while confusion too (in the UK in particular) stems from failure to grasp that the key to the EU attitude is that the internal market may well display a degree of legal heterogeneity which serves to distinguish the four freedoms from each other, but that politically there is implacable determination to resist a Brexit that leads to degradation of homogeneity as a matter of principle.

Changing Markets in Operating Systems; a Socio-Economic Analysis

This paper explores into the character of the market for operating systems in order to reach a better understanding of the characteristics, consequences of fragmentation, and impact in the overall development of the internet and the digital economy. For this purpose we consider the effects on trade and innovation, and on the significance for the architectures of networks in the digital economy. The article includes a review of the various forms of market definition of software operating systems to understand their economic characteristics from a socio-technological view. From the early dominance of IBM’s OS/360 to UNIX-related systems and the disk operating systems [DOS] of IBM and Microsoft through to Apple’s Mac OS and Google systems [Chrome OS and Android], there has been a succession of dominant players. We address the economic theory behind markets in platforms and its relationship with operating systems. Arguments are presented to describe three major sectors where the operating systems market requires further analysis: a) boundaries between the standard roles of consumption and production are blurred in the consideration of operating systems b) novel concepts of ownership c) the decoupling between services and physical supports raises issue of control rather than ownership. In the digital mobile environment, consumers do produce valuable services, or add value to the standard services sold to them. These generate information and data. These data become necessary for the actors operating in other layers of the production chain to add value to their services and products, and to generate brand-new services and applications. Thus, a novel situation occurs: the overall welfare of the system cannot be subdivided into consumer surplus and producer surplus; producers might appropriate some part of the overall welfare by becoming “consumers” themselves of the information and data generated by the (previously-labelled) consumers. We suggest that policy guidelines based on the standard industrial organization analysis are no longer quite so valid and legitimate. The concept of surplus changes meaning when the “consumption” side of the ecosystem can add value and generate new surplus to the “production side”. In the digital mobile industry, most of the inputs used by consumers are not really owned by them. Most of the inputs (intended in terms of both services and goods) utilized by the end user cannot be employed by the latter at will, according to their own “utility function”. The concept of ownership in law and economics is defined by the condition that the “owner” has the right to exclude others from the use of their property and can control the way in which others can restrain their use. The problem of control retraces standard issues covered by “vertical analysis” in competition policy (in terms of foreclosure, discrimination, and fair usage). The literature dealing with the problem of vertical restraints addressess: how ownership in one layer of the chain affects the control of elements or modules in other layers of the vertical production chain, and therefore their usage. The way in which vertical restraints shifts the rights of actors along the chain is a problem much less developed in the literature and we are not aware of any work explicitly modelling and developing this issue.

On the value of counterfac­tual assessments in merger cases

The cost of erroneous decisions in merger cases could be huge. However, authorities cannot eradicate potential errors due to the ex-ante nature of merger control. Nevertheless, to minimise errors, stakeholders have formulated predictive techniques to aid assessments. One of the key means of engineering these techniques is through the use of counterfactuals. The problem, though, is that the status and value of such counterfactual assessments are far from clear. The lack of clarity has thus occasionally raised doubts about the nature, value, scope, and limitations of counterfactual assessments. The results may sound ‘scientific’, yet they are not. On the flip side, the process may appear overly elaborate, yet the result may be the best logical answer available. In light of the foregoing and in order to address all the different implications for mergers, this paper explores the value of the counterfactual in providing relative accuracy. It gives a holistic account of the role of the counterfactual right from the point of market definition up until the stage of ex-post-evaluation. Specifically, it explains the role of the counterfactual in ascertaining the substitutability of products through the use of the hypothetical monopolist test. Further, it details the importance of the counterfactual in the assessment of market power. The paper thereafter assesses the importance of ascertaining the right basis for the counterfactual. This is followed by the summary of the importance and consequence of the counterfactual assessment. The article also addresses the importance of the counterfactuals in efficiency analysis, failing firm defence and remedies.