Incentives to Foreclose
Roman Inderst, Tommaso Valletti, Mar 12, 2009
The European Commissionâ€™s new non-horizontal merger guidelines envisage a three-step approach to assessing the threat of subsequent foreclosure (European Commission. The first step concerns the merged firmâ€™s ability to distort competition and harm rivals on the upstream or downstream market through full- or partial-foreclosure. The second step deals with the integrated firmâ€™s incentives to foreclose; then followed, as a third and final step, by the assessment of potential competitive harm. In this article, we focus, in particular, on the second screen: the assessment of the incentives of a vertically integrated firm to partially or fully foreclose its rivals. Throughout our analysis, we focus exclusively on input foreclosure.