The Economics of Mergers and Competition Law (Background Note)

On March 2000, the European Commission rejected Volvo’s application for competition clearance of the Scania acquisition on the ground that it would give the merged firms a virtual monopoly in Sweden and a clearly dominant position in the Nordic area. Such case leads to the following questions: Why is competition policy necessary? How do you measure market power? How to define the market?

The case discusses the economic analysis of mergers and the parameters of their regulation. It allows the analysis of the determinants of merger activity from a corporate perspective. It also looks at the theory and the practice of merger regulation and aims at discussing the main aspect of competition law, i.e., the abuse of dominant position. A particular emphasize is made on the definition of the relevant market while assessing market power abused.