Recent reforms of the EC Merger Regulation (ECMR)1 and EC Commission’s practice have seen the ascendancy of economics. The Court of First Instance’s (CFI) annulments of three merger decisions in 2002 showed that the Commission had adopted unacceptably lax evidentiary standards.2 The CFI pointed unequivocally to the legal necessity for the EC Commission to adopt proper economic and factual analysis. This it seems to have embraced – it has appointed a Chief Economist for the first time, and adopted a more economics oriented approach. Even prior to the CFI judgments the Commission had began to overhaul its approach. This year the Horizontal Merger Guidelines3 – the first ever – were published bearing the strong imprint of economic learning, after extensive discussion and debate.
As a result of these developments quantitative analysis and evidence will play a greater role in the presentation and assessment of EC mergers. This can be seen from Commission’s decisions affecting the Scandinavian region. In Volvo/Scania4 the Commission stated that it had undertaken an econometric study5 of the impact of the proposed merger on the prices charged for heavy trucks in various national markets. In GE/Instrumentarium (Instrumentarium being a Finnish health equipment company) the EC Commission ‘conducted a series of econometric analyses and has examined econometric studies provided by a third party and the parties.’ 6 While these were treated as complementing the Commission’s more qualitative analysis,7 they show that greater weight is now being placed on statistical analysis in merger clearance decisions. This chapter focuses on quantitative concepts and techniques relevant to the initial aspects of merger analysis, namely market definition and market concentration.8