This preview shows page 1. Sign up to view the full content.
Unformatted text preview: rm dominance Demand variables Low
Low elasticity to price, which could ease
increasing prices profitably
increasing Buyer power: 10 largest buyers of bottled
mineral water account for 70% of total sales of
Nestlé, Perrier, and BSN.
First 4 have 50%: Intermarché, Leclerc, Carrefour,
No single buyer has more than 15%, though 58
58 Single firm dominance
Consumers „loyal“ to a brand. Retailers would
incur losses if they stop to supply a certain brand
(also sales of other goods, as people would go to
Interviews: Merger would diminish bargaining
power with respect to both Nestlé and Perrier.
„pecuniary“ economies of scope: range of waters
they sell would be broader discounts are given
on volume of purchases on all brands of water shift of bargaining power from buyers to sellers.
shift bargaining power of buyers would not limit
market power of sellers significantly.
59 Single firm dominance Efficiency Unlikely
Unlikely gains? (Not addressed by EC!!!) that substantial cost savings can occur brand
brand must be bottled at the source and marketed
under its name no scope economies
regulation does not allow to concentrate production
regulation no scale economies
No Research and Development involved no
60 Joint dominance Nestlé/Perrier and BSN may jointly raise prices. high concentration no buyer power no potential entrants short information lags, frequent transactions market transparency is high (list prices and quantity
rebates are published, same customers, firms report
sales to the government and others receive this
information) prices evolved similarly historically parallel
behavior. symmetry of firms would be high transfer of Volvic
makes firms symmetric collusion likely.
61 Conclusion EC
EC allowed merger with Perrier and transfer of
Volvic to BSN
However, correctly found that joint dominance would
be Remedies: Allowed only under condition that Nestlé sells Vichy,
Thonon, Pierval, St. Yorre to third party. capacity
capacity of 20% in total of Nestlé/Perrier and BSN together –
even though individual market shares of these brands not
However, our analysis reveals that merger
should have been denied as tacit collusion is
likely after some time due to industry
62 Conclusion Also:
Also: Fact that Nestlé and BSN directly
reacted through common agreement when
an outsider (IFINT) tried to enter
an clear signal of coordination between them Incumbents
Incumbents were already tacitly colluding
and entry would have broken this stability
and The transfer of Volvic to BSN only
worsened matters due to increased
View Full Document
This note was uploaded on 01/22/2014 for the course ECON D0T32A taught by Professor Czarnitzkidirk during the Spring '13 term at Katholieke Universiteit Leuven.
- Spring '13