Market Concentration in Europe: Evidence from Antitrust Markets

Abstract

An increasing body of empirical evidence is documenting trends toward rising concentration, profits, and markups in many industries around the world since the 1980s. Two major criticisms of these studies is that concentration and market shares are poorly measured at the national industry level while firm level revenues are a poor indicator of product sales. We use a novel database that identifies over 20,000 product/geographic antitrust markets affected by over 2,000 mergers scrutinized by the European Commission between 1995 and 2014. We show that concentration, as measured by the market-specific post-merger HHI, is larger than reported in the extant literature (at least) by a factor of ten. We also show that concentration has increased over time on average. Yet, there is a great deal of heterogeneity across geographic markets and within broader industries. In a regression analysis that exploits this within-industry variation, we show that barriers to entry are unambiguously positively related to concentration irrespective of time periods, sectors of activity, and geographical market dimension analyzed. Strict past merger enforcement negatively correlates with concentration. Yet, this effect is stronger in the earlier decade (1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004) than subsequently. Intangibility of investments consistently displays positive correlation with concentration only for EU wide and worldwide services markets. In contrast, the correlation is negative in national markets. This underscores the importance of the large heterogeneity present in concentration developments across markets.

Intangibles and industry concentration

“…13 Koltay et al (2020) similarly find clear evidence of rising concentration amongst the 5 largest European economies between 1998 and 2017. Affeldt et al (2021), using novel data based on EU merger cases between 1995 and 2014, find large average increases in market concentration. Lashkari et al (2019) and De Ridder (2019) both find evidence of rising concentration using administrative data for France.…”

Policy lessons from China: A quantitative examination of China's new competition regime for the digital economy

“…Since the 1980s, empirical trends toward rising concentration, profits, and markups in many industries around the world can be observed (Affeldt et al 2021). It is especially digital markets that feature high levels of concentration due to economies of scale and the importance of network effects, both of which mean that early advantages become selfreinforcing (Philippon 2019, p.262).…”

Price Effects of Horizontal Mergers: A Retrospective on Retrospectives

“…The rise of so-called "superstar firms" (with high efficiencies, innovation, and capital deployment) and platform markets (with strong network effects and a large amount of digital/intangible capital, e.g. software, intellectual property, and data) are two of the current developments that are held responsible for the increasing market concentration and decline of competition intensity that has been identified in several industries and sectors (inter alia, Autor et al 2017Autor et al , 2020Gutiérrez & Philippon 2018;Grullon et al 2019;Effenberger et al 2020;Affeldt et al 2021). In light of these developments it is especially interesting to check whether the data set compiled here allows conclusions to be drawn about a relationship between market concentration and postmerger price effects.…”