The if if ds serve partially different markets then

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Unformatted text preview: ofitable input other upstream firms may increase supply of inputs One One would have to check as in horizontal merger cases if firms achieve a dominant position position elasticity elasticity of demand for input, excess capacities of upstream rivals, existence of potential entrants, etc. upstream 38 38 Exclusionary Effects of Vertical Mergers However, However, all negative effects from possible foreclosure would have to be large in order to outweigh positive effects large elimination elimination of double marginalisation in integrated chain integrated efficiency gains leading to cost reductions Not Not possible to say a-priori, but many conditions have to hold that vertical integrations ends up in lower welfare integrations 39 39 Exclusionary Effects of Vertical Mergers What should anti-trust authorities do? Note: can only be welfare detrimental if Note: involved firms have significant market power power 2 important questions: will merger lead to input foreclosure? input input prices for outsider downstream firms will increase competitors will be harmed If so, will consumer prices increase? competition will be harmed 40 40 Case on vertical practices: Ice cream market in Germany 41 41 Introduction 1991: 1991: Mars group filed complaint with EC about exclusive agreements about linking retailers to two leading ice cream producers producers Langnese-Iglo EC (LI) and Schöller prohibted these practices in 1992 42 42 The industry Ice cream production: two options industrial industrial market or process volume in 1990: 439 million litres craft trade market Industrial volume in 1990: 133 million litres. ice cream market „impulse impulse market“: multi-packs: multi-packs: take home packs: take catering packs: catering 132 million litres 132 26 million 26 212 million 212 70 million 70 ice ice cream has to always be kept at low temperature temperature 43 43 The industry Industrial ice cream: firms need to make investments to Industrial ensure that ice cream is refrigerated properly at different stages of the production/distribution process stages Since retailers are unwilling to invest in freezer cabinets, Since ice cream producers made them available in retailers‘ shops. shops. 14 manufacturers that all have less than 10% market 14 share, except the 2 leaders. EC: LI and Schöller 50% and 20% of all ice-cream sales in grocery LI trade (supermarkets etc.) trade > 50% and > 25% in traditional trade Kiosks, gas stations, 50% cinemas, theatres, hotels, restaurants, etc. cinemas, 44 44 The industry Ice Ice cream distributed to grocery trade either directly or through agents directly A manufacturer (MF) often uses exclusive manufacturer purchasing agreements: retailer can only sell ice cream of 1 MF. MF MF also makes available (on loan) freezers, with exclusive clause that obliges retailer to only store MF‘s product in it. store Duration of agreements seem to last 2.5 years Duration on average. on 45 45 Relevant market EC: „industrial impulse ice cream“ market s...
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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.

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