This presentation by Norway was prepared for the break-out Session 1, “Quantitative Evidence”, in the discussion “Economic Analysis in Merger Investigations” at the 19th OECD Global Forum on Competition on 9 December 2020. More papers and presentations on the topic can be found at http://oe.cd/eami. This presentation was uploaded with the author’s consent.

1. Economic Analysis in Merger Control
Contribution from Norway
OECD Global Forum – December 2020
Landrapport
Norge 2018
Magnus

2. NCA Organisational Structure
2
OECD Global Forum on Competition -
Economic analysis of merger investigation

3. Using quantitative analysis
• In all merger reviews, economists are integral
parts to all case teams
– As case handlers
– As specialised resource person from the chief
economist staff
• Increasing focus on using quantitative
analysis over time
– Integral part to merger reviews
3
OECD Global Forum on Competition -
Economic analysis of merger investigation

4. 4
OECD Global Forum on Competition -
Economic analysis of merger investigation

5. Merger Review Process
• Involvement
– From notification to decision
• Appeals processes
– The chief economist team takes the lead in the
appeals processes
• Underpins the emphasis placed on
quantitative analysis
5
OECD Global Forum on Competition -
Economic analysis of merger investigation

6. Analytical approach
• Market definition central to most antitrust cases
– To systematically identify the competitive constraints
facing firms
– However, problematic when differentiated products and/or
two-sided markets
• Alternative approaches measuring unilateral effects
directly
– Using gross profit margins and diversion rates to calculate
upward pricing pressure indicies
– Diversion rates using customer surveys
– Competitive closeness
6
OECD Global Forum on Competition -
Economic analysis of merger investigation

7. Analytical approach
• The NCA's experience so far is that customer
surveys and diversion ratios gives useful
information relating to the market definition
and to assess competitive pressure, especially
cases involving differentiated products and
two sided-markets
7
OECD Global Forum on Competition -
Economic analysis of merger investigation

8. Overview
• Measuring competitive closeness
• Analysis of tender data
• Price correlation
8
OECD Global Forum on Competition -
Economic analysis of merger investigation

9. Competitive closeness
• The effect of the merger on price is determined
by how close competitors the two firms are,
which in turn is determined by how close
substitute the products are.
• Consequently, a problem with the traditional
approach is that market shares do not directly
measure substitution.
• Market shares may therefore give a wrong
picture when it comes to the effect of the merger.
• To identify how close the competitors are, it is
crucial to measure the degree of substitution
9
OECD Global Forum on Competition -
Economic analysis of merger investigation

10. Competitive closeness
• The NCA has the last decade gained substantial
experience using alternatives to the traditional
approach
– Price pressure indicators used (UPP or GUPPI)
– Diversion rates measured through:
• Econometric studies
• Demand estimation
• Shock analysis
• Effects of, e.g., sales campaigns
• Customer surveys
• Internal documents
• Churn data
10
OECD Global Forum on Competition -
Economic analysis of merger investigation

11. Example
• COOP-Ica merger (groceries) in 2014
– Quantitative screening (isochrones)
– Qualitative screening (GIS information on store location,
revenue, road network, etc.)
– Customer survey (on second choice) to calculate diversion
rates
– Information from the merging parties used to estimate
margins
– Simple OLS regression to determine factors that influence
how close rivals stores are
• Proximity and store size important factors
– Approved with remedies
11
OECD Global Forum on Competition -
Economic analysis of merger investigation

12. Tender analysis
• The «usual» rules for competition analysis
typically apply
– Although, sometimes argued that:
• Market share is a poor indicator of market power
• Tender markets only require two/few firms to submit
tenders
• Always aggressive competition
12
OECD Global Forum on Competition -
Economic analysis of merger investigation

13. Tender analysis
• Tender data provide information on which
companies are active, who is bidding against who,
how many are bidding for each tender, etc.
• Competition closeness
– How often do companies meet?
– How many bidders are enough?
– Competitive relevance (attempt to estimate the effect
of the presence a company has on the outcome of a
tender)
– Competitive proximity (winner and runner up in each
contest)
13
OECD Global Forum on Competition -
Economic analysis of merger investigation

14. Examples
• Torghatten-Fjord1
– Tenders in the local ferries (essential part of the
national infrastructure)
– Analysed data from 72 tenders
– Merger was blocked (and not appealed)
• Prosafe-Floatel
– Offshore accommodation providers (semi-
submersibles)
– Tender data from both the UK and NO sectors
– Merger was blocked, appealed and ultimately
withdrawn
14
OECD Global Forum on Competition -
Economic analysis of merger investigation

15. Other approaches
• Price correlation
– Used in merger review: Smart Fuel – St1 Nordic
(petrol station chains)
• Cathment area
– Used in merger review: SATS-Elixia (fitness
centre chains)
15
OECD Global Forum on Competition -
Economic analysis of merger investigation

16. Thank you for the attention!
Please feel free to contact me for questions or comments
Jan Yngve Sand
Chief Economist, The Norwegian Competition Authority
Jan.sand@kt.no
16
OECD Global Forum on Competition -
Economic analysis of merger investigation