Following AT&T/Time Warner and the recent adoption of U.S. Vertical Merger Guidelines, vertical merger policy has again become a subject of intense debate. Some commentators have argued that vertical merger enforcement is too lax and should be invigorated, in particular in the U.S. Others see a greater risk of false positives and argue that the standard for intervention should remain high in such cases. Against this background, this article discusses the economics of assessing vertical mergers with a particular emphasis on recent European case practice.

By Hans Zenger1

 

I. INTRODUCTION

Following AT&T/Time Warner and the recent adoption of U.S. Vertical Merger Guidelines, vertical merger policy has again become a subject of intense debate.2 Some commentators have argued that vertical merger enforcement is too lax and should be invigorated, in particular in the U.S.3 Others see a greater risk of false positives and argue that the standard for intervention should remain high in such cases.4 Against this background, this article discusses the economics of assessing vertical mergers with a particular emphasis on recent European case practice.

Like much of the debate, the article focuses on input foreclosure, the most common theory of harm in vertical mergers. Input foreclosure denotes the deterioration of access conditions to a critical input for downstream rivals of an integrated firm. It includes practices such as raising the input’s price, reducing its qu

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