Will new assesment tools make it easier for firms to merge?

Will new assesment tools make it easier for firms to merge?

April 13, 2015

Top officials from four European competition authorities gathered in Copenhagen on 2 March with Danish lawyers and economists to assess a range of new tools in merger assessment that are increasingly being used in the UK and US. Two Chief Economists and two Directors took part in the meeting that was hosted by the Danish Competition Law Society and took place at the premises of Copenhagen Economics.


The new tools were introduced by the key note speaker, Dr. Miguel de la Mano (Chief Economist at the UK Competition Commission). The new tools, called diversion ratios and upward pricing pressure, focus on protecting competition between individual firms or brands rather than on protecting markets from the presence of large companies.


When the new tools gain ground they can make life for Scandinavian firms may both be easier or tougher by improving the prospects for some mergers, but worsening them for others.

The new tools are here to stay

It became evident that the tools are here to stay. The UK and Norway authorities showed that they are using the new tools on a regular basis and the Danish authority is ready to follow their lead. Director General, Agnete Gersing, stated that the Danish authority was well prepared to use the new tools: “Our infrastructure has been ready for six months. We are only waiting for the right case before we start using the new tools.”

The new tools can help authorities make better decisions

Director, Dr. Jostein Skaar from the Norwegian authority argued that the new tools will improve decisions: “The analysis becomes more empirically based and linked to the actual case that is evaluated. This will lead to better decisions.” He stressed that the new tools also cast new light on market definition and can help identify the best remedies in problematic mergers.  


The new tools complement existing methods

Chief Economist, Christian Ewald, from the German authority warned that even though the new tools surely were promising, they would still only complement the current assessment methods, and one should be careful not to only examine mergers under the lamp posts. In the end, however, the new tools certainly have significant potential to improve an economically sound merger assessment.