Remedies in Vertical Merger Cases

Senior Economist Dr. Oliver März authored an article for Wirtschaft und Wettbewerb discussing the effects of structural and behavioural remedies on the incentives to pursue a strategy of input foreclosure after a vertical merger.

This article was originally published by Wirtschaft und Wettbewerb here. The views expressed in this paper are the sole responsibility of the authors and cannot be attributed to Compass Lexecon or any other parties.

Abstract

In this article, we examine the impact of structural and behavioural remedies on the incentives to pursue a strategy of foreclosure of inputs after a vertical merger. We show that structural remedies in the form of a divestiture of parts of a company can, under certain conditions, strengthen the incentives to foreclose compared to the situation without a divestiture. Behavioural remedies, specifically in the form of switching assistance, may be a more appropriate measure to minimise the incentives to foreclose in such circumstances. Structural remedies, which are often preferred by competition authorities, can thus be counterproductive in vertical mergers.

Read the full article in German here (subscription required)