No Shortage of Theories: The Role of Capacity in Antitrust Analysis

Sacher, Seth B.; Sandford, Jeremy

doi:10.2139/ssrn.2804948

Cited by 2 publications

(3 citation statements)

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“…First, at least one of the upstream and downstream markets is conducive to horizontal collusion (Riordan and Salop, 1995). Second, if firms co-ordinate on prices and/or output, the excess capacity is a necessary condition for such coordination to have taken place (Sacher and Sandford, 2016). Vertical integration enhances problems rather than creates them.…”

Section: On Vertical Integration and Competition Effectsmentioning

confidence: 99%

Competition effects of vertical integration in container ports: assessing the European Commission decisional practice

Kollia,

Pallis

2024

MABR

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PurposeContainer liner shipping companies started expanding their business by investing in container port terminals in the late 1990s. This market entry results in an extensive presence of vertically integrated liners and terminals. This study aims to explore the competition effects of this vertical integration trend based on a regional (European) analysis. In particular, it extracts lessons from the European Commission (EC) cases on the competition effects of vertical integration. The critical analysis of the cases examined at the institutional level intends to reach conclusions on whether liner–terminal vertical integration harmed or advanced competition in the relevant markets and/or the extent that there is a need to revise the current policy practices.Design/methodology/approachThis study critically assesses the EC’s decisional practices in port container terminal vertical mergers in the last 25 years (1997–2021). Based on a literature review comparing maritime and competition economists' perspectives, it reviews the types of mergers examined, the methodology followed for relevant market definition and calculation of market shares, and the estimated competition effects. The Hamburg-Le Havre area is the port range used as a case study for comparing the decisional practice with actual market developments. These container ports serve the greatest consuming market of final and intermediate goods in Europe and are gateways to Central and Eastern Europe.FindingsThe assessment identifies a need for expanding the investigation as a precondition for reaching conclusions on both the anti and pro-competitive effects. First, only a limited number of transactions have been notified to the EC. Second, the empirical research identified a gap in this process, as there were no decisions (phase I) on vertical mergers between 2008 and 2016. Third, the ex-ante assessment has not applied a phase II in-depth analysis to any case due to the absence of competition concerns. Finally, due to the absence of complaints, there is a lack of any ex post assessment of the effects of vertical integration.Research limitations/implicationsThis assessment is important for understanding the current and emerging features of intra-port and inter-port competition and the potential effects that the continuation and expansion of liner companies' vertical integration strategies will have along maritime supply chains. It also contributes to the broader discussion on liner companies' strategies, such as the research and policy-making efforts around the globe to understand the impact of both vertical and horizontal integration.Practical implicationsThese discussions are critical for a diversity of businesses that use liner shipping services or provide facilities and services to container shipping lines or ports. They are important for the interests of customers and consumers as they could inform any needed re-visiting of competition policy to protect from the dominance of any market developments that would lead to conditions limiting competition. Expanding analysis on the competition effects of non-notified mergers would help a better understanding of market changes.Social implicationsEnhancing competition and limiting monopolies is valuable from a consumer's perspective. This is more so in the case of maritime trade that serves the needs of societies. The study contributes by generating a better understanding of how decision-makers have worked towards that direction and what realignments are worthy.Originality/valueThere are no previous comprehensive reviews and analyses of the ways that policy-makers at the regional level have addressed the competition effects of vertical integration strategies of liner shipping companies when enhancing competition is valuable from a consumer perspective. Comparing maritime economists and competition. The study, via its literature review, also offers a comparison of maritime and competition perspectives on these competition effects, allowing positioning of how effective decisional-making practices have been.

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Section: On Vertical Integration and Competition Effectsmentioning

confidence: 99%

Competition effects of vertical integration in container ports: assessing the European Commission decisional practice

Kollia,

Pallis

2024

MABR

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“…Other papers discuss merger price effects when one or both merging firm is constrained in the context of a Cournot model (see Sacher and Sandford, 2016; Balan et al., 2017) or a differentiated Bertrand model (see Neurohr, 2016; Oxera, 2016; Balan et al., 2017). All point out that if both merging firms are capacity‐constrained pre‐merger, positive price effects of the merger result if and only if at least one constraint no longer binds post‐merger.…”

Section: Introductionmentioning

confidence: 99%

“…(2003), Higgins et al. (2004), Sandford and Sacher (2016), Neurohr (2016), Oxera (2016), Balan et al. (2017), and Chen and Li (2018).…”

mentioning

confidence: 99%

Upward pricing pressure in mergers of capacity‐constrained firms

Greenfield

Sandford

2021

Economic Inquiry

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Merging firms regularly argue that mergers involving capacity‐constrained firms are unlikely to be anticompetitive, because a capacity‐constrained firm does not represent a meaningful competitive constraint on its rivals. We construct a modified notion of upward pricing pressure called ccGUPPI, or capacity‐constrained GUPPI, which accounts for upward pricing pressure from binding capacity constraints, in addition to standard merger effects. We show that the pricing pressure terms underlying ccGUPPI, calculated using premerger data, are sufficient to determine whether a merger of capacity‐constrained firms will increase price, irrespective of the functional form of demand. Further, using Monte Carlo simulation, we show that ccGUPPI is generally a useful proxy for actual price effects, with lower informational requirements than full merger simulation.

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No Shortage of Theories: The Role of Capacity in Antitrust Analysis

Cited by 2 publications

References 3 publications

Competition effects of vertical integration in container ports: assessing the European Commission decisional practice

Competition effects of vertical integration in container ports: assessing the European Commission decisional practice

Upward pricing pressure in mergers of capacity‐constrained firms

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