Panagiotis N. Fotis

The Short-Run Competitive Effects of Merger Enforcement

The main purposes of this paper are twofold. On the one hand, we calculate the sign of the effect of merger and phase II announcement (or decision/ referral) on merged firms’ stock value, while on the other hand, we investigate the possible short-run effects of the scrutinised mergers on competitors’ stock value. This paper extends the articles of Maynes and Rumsey,1 Cox and Portes,2 Duso et al3 and Barthodly et al 4 by introducing the simple return approach so as to overcome the infrequent trading phenomenon. It also infers short-run outcomes regarding the competitive effects of four major phase II mergers that have been notified to the Hellenic Competition Commission (HCC) during the period 2006–10. Despite its crucial importance, to the best of our knowledge the infrequent trading phenomenon has not been incorporated yet in an event study examination of the competitive effects of mergers on competitor’s stock value. Therefore, we argue that this kind of analysis will create strong benefits for other countries and their competition authorities as well.

The Use of Economic Tools in Merger Analysis: Lessons From US and EU Experience

The importance of economic analysis in the application of competition rules, especially in mergers, has increased over the last few years. Econometric techniques may help competition agencies to assess merger cases quickly and guide them towards better decision making when faced with the increasing complexity of markets. Agencies employ a lot of techniques, from very basic to sophisticated ones. Today it is widely accepted that the use of economics has improved the decisions of competition authorities when it is appropriate. This interest in economic evidence reflects the increasing use of economics and economic analysis in merger control as evidenced first in the US with the Merger Guidelines of 1984 and 1992. In the US the use of economic analysis is evident in the calculation of the significant lessening of competition (SLC) test. Under this test, a merger may have anticompetitive effects if it is likely to substantially lessen competition in the market. Under the aforementioned test, the investigation and assessment of a merger are more concerned with whether prices are likely to rise after the merger is consummated. In the EU, mergers are regulated by the Merger Regulation 139/2004, which came into force in January 2004. The law requires that firms proposing to merge apply for prior approval from the European Commission (EC); specifically, mergers that transcend national borders, and where the annual turnover of the combined business exceeds a worldwide turnover of over e5000 million and a Community-wide turnover of over e250 million, must notify and be examined by the EC. The Merger Regulation thus involves predicting potential market conditions which would pertain after the merger. The standard set by the law is whether a combination would significantly impede effective

Economic Tools for Merger Appraisal: A Theoretical and Empirical Standpoint

This paper presents in a retrospective manner economic tools for merger control and market delineation. Particularly, it focuses, via theoretical and empirical standpoint, on price based techniques for merger control such as tools of market delineation in one sided markets as the «Could Approach» of Critical Loss analysis, and tools for measuring the unilateral effects of a merger such as the Upward Pricing Pressure by Farrell & Shapiro (2010), the Gross Upward Price Pressure Index (2010) by Moresi (2010) and the Buying Power Index by Blair & Harrison (2010). The theoretical standpoint reveals that economic tools for merger control have been enhanced through the time in order to deal with the increasingly amount of merger cases, while the empirical standpoint supports the idea that competition economics have become a standard reference during the analysis of them. Even though competition analysis for antitrust and abuse of dominant position cases is considered to be a castle for lawyers, economists play a crucial role in quantifying the effects of mergers on competition

Price-Based Techniques for Market Definition & Buying Power Index

This paper focuses on a recent merger in Greek diary sector and empirically investigates the delineation of the market of production and distribution of white milk in Greece, the role of product asymmetries in market delineation along with evidences of unilateral effects of the merger and the existence of buying power of merged entity in the relevant product market for the procurement of raw milk. The empirical results indicate that the markets of production and distribution of fresh, High Pasteurization & Condensed milk in Greece are highly inelastic and constitute distinct relevant product markets. Large product asymmetries lead to broader relevant product markets, while evidences of unilateral effects are present for specific pairs of white milk products. Lastly, the merged entity may exercise its buying power after the clearness of the merger, even thought in the case where the market elasticity of supply and the own price elasticity of demand of the competitive fringe are highly inelastic.

Gasoline Price Asymmetries in the Euro Zone

This paper uses the generalized method of moments (GMM) estimation to a panel data error correction model (ECM) in order to measure the asymmetries in the transmission of shocks to input prices and exchange rate onto the wholesale and retail gasoline price respectively. For this purpose, we use an updated data set of weekly observations covering the period from January 2000 to February 2011 for eleven euro zone countries (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Portugal and Spain). The results favor the common perception that retail and wholesale gasoline prices respond asymmetrically to cost increases and decreases.