• Horizontal Merger
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Mergers and acquisitions - Types of M&A by functional roles in market
1
A horizontal merger is usually between two
companies in the same business sector.
The example of horizontal merger would
be if a health care system buys another
health care system. This means that
synergy can obtained through many forms
including such as; increased market share,
cost savings and exploring new market
opportunities.
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Competition law - Mergers and acquisitions
The market shares of the merging
companies can be assessed and added,
although this kind of analysis only gives
rise to presumptions, not conclusions.see,
for instance para 17, Guidelines on the
assessment of horizontal mergers (2004/C
31/03) The Herfindahl index|HerfindahlHirschman Index is used to calculate the
density of the market, or what
concentration exists
1
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Merger - Types of MA by functional roles in market
1
*A horizontal merger is usually between
two companies in the same business
sector. The example of horizontal merger
would be if a health care system buys
another health care system. This means
that synergy can obtained through many
forms including such as; increased market
share, cost savings and exploring new
market opportunities.
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United States antitrust law - Horizontal mergers
1
*Northern Securities Co. v. United States, horizontal
merger under the Sherman Act
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United States antitrust law - Horizontal mergers
1
*Horizontal Merger Guidelines
(2010)
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Mergers and acquisitions in United Kingdom law - Competition law
The market shares of the merging
companies can be assessed and added,
although this kind of analysis only gives
rise to presumptions, not conclusions.see,
for instance para 17, Guidelines on the
assessment of horizontal mergers (2004/C
31/03) Something called the Herfindahl
index|Herfindahl-Hirschman Index is used
to calculate the density of the market, or
what concentration exists
1
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Merger control - Horizontal mergers
1.6
http://www.internationalcompetitionnetwork
.org/uploads/library/doc321.pdf A
horizontal merger is one between parties
that are competitors at the same level of
production and/or distribution of a good or
service, i.e., in the same relevant
market|relevant market.^ International
Competition Network - Merger Guidelines
Workbook, para
1
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Merger control - Horizontal mergers
There are two types of anticompetitive
effects associated with horizontal mergers:
unilateral effects and coordinated effects.
1
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Merger control - Horizontal mergers
1
The likelihood and magnitude of such an
increase will instead depend on the
substitutability of the products supplied by
the two firms – the closer the substitute,
the greater the unilateral effects.European
Commission - Horizontal Merger
Guidelines, para
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Merger control - Horizontal mergers
3.6
http://www.internationalcompetitionnetwork
.org/uploads/library/doc321.pdf As in the
case of unilateral effects, the most
common form of coordinated effects is in
the case of horizontal mergers, i.e
1
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Merger control - Horizontal mergers
1
European Commission Horizontal Merger
Guidelines, para
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Merger control - Non-horizontal mergers
There are two basic forms of nonhorizontal mergers: vertical mergers and
conglomerate mergers.^ International
Competition Network - Merger Guidelines
Workbook, para. 3.7
http://www.internationalcompetitionnetwork
.org/uploads/library/doc321.pdf
1
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Merger control - Non-horizontal mergers
In purely vertical mergers there is no
direct loss in competition as in horizontal
mergers because the parties' products did
not compete in the same relevant market
1
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Merger control - Non-horizontal mergers
1
Vertical effects can produce competitive harm
in the form of foreclosure. A merger is said to
result in foreclosure where actual or potential
rivals' access to supplies or markets is
hampered or eliminated as a result of the
merger, thereby reducing these companies'
ability and/or incentive to compete.European
Commission Non-Horizontal Merger
Guidelines, para. 29 http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=
OJ:C:2008:265:0006:01:EN:HTML
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Merger control - Non-horizontal mergers
Two forms of foreclosure can be
distinguished. The first is where the merger is
likely to raise the costs of downstream rivals
by restricting their access to an important
input (input foreclosure). The second is
where the merger is likely to foreclose
upstream rivals by restricting their access to
a sufficient customer base (customer
foreclosure).European Commission NonHorizontal Merger Guidelines, para. 30
http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=
OJ:C:2008:265:0006:01:EN:HTML
1
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HMV - Australia
1
The horizontal merger was approved by
the Australian Competition and Consumer
Commission|ACCC that same month
leaving Brazin to merge marketing and
general operations within the one
entertainment division
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Williamson trade-off model
1
The 'Williamson trade-off model' is a theoretical model in the
economics of industrial organization which emphasizes the
trade-off associated with horizontal mergers between gains
resulting from lower marginal cost|costs of production and the
losses associated with higher prices due to greater degree of
monopoly power.Robert Beynon,
[http://books.google.com/books?id=26m3RXKUuQICpg=PA34
9lpg=PA349dq=Williamson+trade+off+modelsource=blots=2E
zE7a9bfwsig=B1AVpfWqnzC70fm35GJso3iNedQhl=enei=TG
JNS-gM5X2NYWx2O4Msa=Xoi=book_resultct=resultresnum=10ve
d=0CCkQ6AEwCQ#v=onepageq=Williamson%20trade%20off
%20modelf=false The Routledge critical dictionary of global
economics], Taylor Francis, 1999, p
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Williamson trade-off model - Basic idea of the model
1
More generally however, a horizontal merger can
involve both costs and benefits.
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Herfindahl index - Example
1
16-21 Guidelines on horizontal mergers
So to take the example, if in market X
company B (with 10% market share)
suddenly bought out the shares of
company C (with 10% also) then this new
market concentration would make the
index jump to 0.162
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Merger guidelines - History of the Merger guidelines
1
Dick, The Merger Guidelines and the
Integration of Efficiencies into Antitrust
Review of Horizontal Mergers, 10 June
2002]
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Merger guidelines - History of the Merger guidelines
1
The 1997 Horizontal Merger Guidelines
were replaced with the most recent
version in 2010. This version was
released on August 19,
2010.[http://ftc.gov/os/2010/08/100819hm
g.pdf 2010 Horizontal Merger Guidelines]
The 2010 Guidelines introduced the
concept of upward pricing pressure
resulting from a merger between
competing firms.
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