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Capacity Constraints and Irreversible Investments: Defending Against Collective Dominance in UPM Kymmene/Norske Skog/Haindl

Kai Uwe  Kühn,  John  Van Reenen,  February 2008
Paper No' CEPSP19: | Full paper (pdf)
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This Paper is published under the following series: CEP Special Reports
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Abstract:

Scrutiny of potential mergers by the European Commission often focuses on unilateral effects or single firm dominance. But some cases have involved concerns over coordinated effects: the concern that the merger could increase the likelihood of consumer harm through tacit collusion by the reduced number of firms in the industry (this is known as collective dominance). The economic and legal issues are far less certain in these cases and a particular challenge is how to bring empirical evidence to bear on the decision. In this chapter we examine a case in newsprint and magazine paper - UPM Kymmene/Norske Skog/Haindl . Here, coordinated effects were at the centre of the Commission’s concerns. We discuss how collusion theory and evidence were used to help clear the merger without remedies in the final Decision.