Substantial Convergence or Parallel Paths? Similarities and Differences in the Economic Analysis of Horizontal Mergers in U.S. and EU Competition Law

• DOI: 10.1177/0003603X0404900104
• Published date: 01 March 2004
• Date: 01 March 2004
• Subject Matter: Antitrust in the U.S. and the EU: Converging or Diverging Paths?

The Antitrust Bulletin/Spring-Summer 2004

Substantial convergence or parallel

paths? similarities and differences

in the economic analysis

of

horizontal

mergers in U.S. and EU competition

law

BY LORENZO COPPI* and MIKE WALKER**

101

Before the GElHoneywel/l case, the consensus was that transatlantic

merger control

displayed

remarkable substantive convergence,

despite substantial procedural differences.? In the aftermath

of

GE/Honeywell,

commentators

have

emphasized

the

many

significant differences in the way U.S. and European Community

(EC) competition authorities assess mergers.' The recent debate on

the reform

of

European Union (EU) merger control has further

highlighted apparent differences between the analyses carried out in

*

**

Principal, Charles River Associates, Washington, DC.

Vice President, Charles River Associates, London.

Case COMPIM.2220 (2001).

2See

ANTITRUST

GOES

GLOBAL

(Simon

J.

Evenett,

Alexander

Lehmann &Benn

Steil

eds., 2000); and especially the contributions

therein by James S. Venit &William J. Kolasky, and by Edward M.

Graham.

3See, e.g.,

William

J. Kolasky (ex-Deputy

Assistant

Attorney

General at the U.S. Department of Justice), Conglomerate Mergers and

Range Effects:

It's

ALong Way From Chicago to Brussels, Address

Before the George Mason University Symposium (Nov. 9, 2001).

e2004 by Federal Legal Publications. Inc.

102 The antitrust bulletin

the two jurisdictions. Where is the truth? Is the way EC and U.S.

merger control works inherently different? This article attempts an

answer to these questions by looking beyond the formal and official

positions of the antitrust agencies and by focusing on the practical

difference in the assessment of mergers, as experienced by antitrust

practitioners who work on mergers reviewed in both jurisdictions.

Contrary to what officials

of

the various agencies would like to

convey, it is our opinion that there are many important, and often

understated, practical differences in the way mergers are reviewed

on the two sides of the Atlantic. Three qualifications are necessary.

First, we focus on substantive differences in economic analysis

between the two jurisdictions and not on legal and procedural

differences. Second, our discussion is centered on the similarities

and differences between how mergers are commonly analyzed by

the

Department

of

Justice

(DOJ)

and

the

Federal

Trade

Commission

(FTC)

in

the

United

States

and

the

European

Commission in the European Union. However, other agencies also

review mergers (such as the Federal Communication Commission

and the Department

of

Defense in the U.S. and national competition

authorities in EU member states). These sometimes have different

practices from that

of

the "main" agencies. Finally, the judicial

defeats suffered by the European Commission in 20024and the

ensuing

reform

of

the

European

Merger

Regulation>

(the

Regulation) initiated aprocess

of

reassessment, refocusing and

change in the practice of the European Commission. It is still too

early to appreciate the full implications of this process, but it is our

opinion that it is facilitating convergence

of

the practices of the

agencies in the two jurisdictions. Nevertheless, we believe that the

traditional European approach will not change overnight, and that

4Tetra Laval BV v. Commission (Judgments

of

the Court

of

First

Instance in Cases T-05/02 and T-80/02); Airtours v. Commission (Case

T-342199);

Schneider Electric v. Commission (Cases T-31O/0l and T-77/02).

Proposal for a Council Regulation on the control

of

concentrations

between

undertakings

(0.1.

(C

20),

Jan.

28,

2003),

proposing

amendments to the Council Regulation (EEC) No. 4064/89

of

December

21, 1989 on

the

Control

of

Concentrations

Between

Undertakings

(E.C.M.R., consolidated text).

Horizontal mergers :103

most of the issues highlighted in this article will still be relevant in

the future.

The main conclusion of the article is that there are important

differences in the practical analysis of mergers in the two jurisdic-

tions. Not only, as recognized by many commentators and implicitly

accepted by the European Commission, is there a "gap" in Euro-

pean merger control in that some of the U.S.-style unilateral effects

analysis is not normally carried out in Europe, but, more importantly,

the overall focus of the investigation can be radically different. We

believe that many of the differences in approach have to do with the

difference between the concept of market power, which is at the

heart of the U.S. analysis, and that of dominance, which is the basis

of the analysis in Europe.

The plan of the article is as follows. We first look at the similari-

ties in the way markets are defined in the two jurisdictions and then

focus on the different legal tests and the implications for economic

analysis. We then look at the practical treatment of horizontal mergers

by discussing single and collective dominance on the one hand and

unilateral and coordinated effects on the other. We conclude with a

few remarks on likely future developments.

I.

Market definition

The exercise of market definition is formally equivalent in the two

jurisdictions, as in both it is based on the degree of substitutability

between products.' with close substitutes being considered as part of

the same relevant market. Furthermore, both jurisdictions employ the

6The

Notice

on the Definition

of

the

Relevant

Market

for

the

Purposes

of

Community

Competition

Law

[1997]

O.J.

(C

372)

[hereinafter the Notice on Market Definition] stipulates that: "A relevant

product market comprises all those products and/or services which are

regarded as interchangeable or substitutable by the consumer, by reason

of the products' characteristics, their prices and their intended use."

(17).

The U.S.

DOJIFfC

Horizontal Merger Guidelines (1992, amended 1997)

[hereinafter the Guidelines] similarly maintain that: "Market definition

focuses solely on demand substitution

factors-i.e.,

possible consumer

responses." (§ 1.0)