Global Competition Law is primarly a practitioner's guide presenting the most salient aspects of the major competition laws country by country, giving an overview of their structure and most charasteristic elements.
Global Competition Law also provides insight into possible future developments in the field.

Global Competition Law

In the 2020 Vertical Merger Guidelines, the Doj and FTC indicate the manner in which they will evaluate whether a vertical merger will substantially lessen competition and thus whether they consider it necessary to challenge the merger before the Federal District Court. According to the guidelines, a vertical merger may lessen competition between one merging firm and rivals that trade with, or cou …

Vertical mergers

Pursuant to the June 2020 Vertical Merger Guidelines, non-horizontal mergers encompass “strictly vertical mergers (those that combine firms or assets at different stages of the same supply chain), “diagonal” mergers (those that combine firms or assets at different stages of competing supply chains), and vertical issues that can arise in mergers of complements”.

A “diagonal merger” is described as a merger between a manufacturer and a company that supplies inputs to its competitors, that the buyer will not use in its own production, for instance because the input is incompatible with its own products.

A “merger of complements” arises where the manufacturer of an input merges with the manufacturer of another input, where neither input is upstream nor downstream from the other in the supply chain and where both inputs are used for the manufacture of a finished product.

Definition

In the 2020 Vertical Merger Guidelines, the Doj and FTC indicate the manner in which they will evaluate whether a vertical merger will substantially lessen competition and thus whether they consider it necessary to challenge the merger before the Federal District Court. According to the guidelines, a vertical merger may lessen competition between one merging firm and rivals that trade with, or could trade with, the other merging firm. The most common types of unilateral effects arising from vertical mergers are foreclosure and raising rivals’ costs and access to competitively sensitive information. 

The DoJ and FTC will therefore consider whether the merging firm will have the ability and incentive to implement a foreclosure strategy. A vertical merger may allow the merged firm to profitably use its control of the related product to weaken or remove the competitive constraint from one or more of its  actual  or  potential  rivals  in  the  relevant  market. It  may for instance increase the vertically integrated firm’s incentive or ability to raise its rivals’ costs by increasing the price or lowering the quality of the related product. The merged firm could also foreclose its rivals by refusing to supply the related products altogether. 

The evaluation of whether the  merger  may  substantially  lessen competition will  generally  include  an  assessment  of  the  likely  net  effect  on competition in the relevant market of all changes to the merged firm’s unilateral incentives. The merged firm may foreclose its rivals or raise their costs by changing the terms offered for the related product. But the elimination of double marginalization may also confer on the merged firm an incentive to set lower downstream prices. A vertical merger may also lessen competition in the relevant market by making entry by competitors less likely because of the necessity to enter both the upstream and downstream markets to compete effectively with the merged firm ("two-level entry"). 

Finally, a vertical merger may give the combined firm access to and control of sensitive business information about its upstream or downstream rivals that was unavailable to it before the merger. 

As stated above, the 2020 Vertical Merger Guidelines introduce the concept of mergers of complements raising vertical issues. This concept, which is very close to the concept of conglomerate merger, covers the situation where the manufacturer of an input merges with the manufacturer of another input, where neither input is upstream nor downstream from the other in the supply chain and where both inputs are used for the manufacture of a finished product.

The DoJ and FTC may investigate  whether  the  merged  firm  would have the  ability and incentive to disadvantage rival manufacturers of the main input. For example, the merged firm might do so by increasing the price of the related input to its customers (e.g., the manufacturers of the finished product) that do not also buy the merged firm’s principal input. The merged firm may also have an incentive to offer lower prices for the principal input to its customers that do buy both components from it. If the agencies conclude that both countervailing price effects are likely to be present post-merger, they will conduct a balancing of the effects to determine the net effect on the prices customers will likely pay.

Global Competition Law

1478. Vertical mergers

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Les notions juridiques connexes

1478. Vertical mergers

Demandez un accès gratuit au contenu exclusif Livv – juristes d’entreprise

Les notions juridiques connexes

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise