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Unilateral Effects Screens for Partial Horizontal Acquisitions: The Generalized HHI and GUPPI

Author

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  • Brito, Duarte
  • Osório, António (António Miguel)
  • Ribeiro, Ricardo
  • Vasconcelos, Helder
Abstract
Recent years have witnessed an increased interest, by competition agencies, in assessing the competitive effects of partial acquisitions. We propose a generalization to a partial horizontal acquisition setting of the two most traditional indicators used to screen unilateral anti-competitive effects: the Helfindahl- Hirschman Index and the Gross Upward Price Pressure Index. The proposed generalized indicators can deal with all types of acquisitions that may lessen competition in the industry: acquisitions by owners that are internal to the industry (rival firms) and engage in cross-ownership, as well as acquisitions by owners that are external to the industry and engage in common-ownership. Furthermore, these indicators can deal with direct and indirect acquisitions, which may or may not correspond to control, and nest full mergers as a special case. We provide an empirical application to several acquisitions in the wet shaving industry. The results seem to suggest that (i) a full merger induces higher unilateral anti-competitive effects than a partial controlling acquisition involving the same firms, (ii) a partial controlling acquisition induces higher unilateral anti-competitive effects than a partial non-controlling acquisition involving the same firms and the same financial stakes, and (iii) an acquisition by owners that are internal to the industry induces higher unilateral anti-competitive effects than an acquisition (involving the same firms and the same stakes) by external owners that participate in more than one competitor firm. JEL Classification: L13, L41, L66 Keywords: Antitrust, Partial Horizontal Acquisitions, Oligopoly, Screening Indicators, HHI, GUPPI

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  • Brito, Duarte & Osório, António (António Miguel) & Ribeiro, Ricardo & Vasconcelos, Helder, 2015. "Unilateral Effects Screens for Partial Horizontal Acquisitions: The Generalized HHI and GUPPI," Working Papers 2072/260963, Universitat Rovira i Virgili, Department of Economics.
    • Handle: RePEc:urv:wpaper:2072/260963
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    Cited by:

    1. Lømo, Teis Lunde, 2024. "Overlapping ownership, pass-through, and product differentiation," Economics Letters, Elsevier, vol. 237(C).
    2. José Azar & Xavier Vives, 2018. "Oligopoly, Macroeconomic Performance, and Competition Policy," CESifo Working Paper Series 7189, CESifo.
    3. Miguel Antón & Florian Ederer & Mireia Giné & Martin Schmalz, 2023. "Common Ownership, Competition, and Top Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 131(5), pages 1294-1355.
    4. Duarte Brito & Einer Elhauge & Ricardo Ribeiro & Helder Vasconcelos, 2018. "Modeling Horizontal Shareholding with Ownership Dispersion," Working Papers de Economia (Economics Working Papers) 01, Católica Porto Business School, Universidade Católica Portuguesa.
    5. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2018. "Quantifying the coordinated effects of partial horizontal acquisitions," European Economic Review, Elsevier, vol. 110(C), pages 108-149.
    6. José Azar & Xavier Vives, 2021. "General Equilibrium Oligopoly and Ownership Structure," Econometrica, Econometric Society, vol. 89(3), pages 999-1048, May.
    7. Hassan Benchekroun & Miao Dai & Ngo Van Long, 2020. "On the Profitability of Cross-Ownership in Cournot Oligopolies: Stock Sizes Matter," CIRANO Working Papers 2020s-43, CIRANO.
    8. Brito, Duarte & Elhauge, Einer & Ribeiro, Ricardo & Vasconcelos, Helder, 2023. "Modelling the objective function of managers in the presence of overlapping shareholding," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    9. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2020. "Overlapping ownership, endogenous quality, and welfare," Economics Letters, Elsevier, vol. 190(C).
    10. Moreno, Diego & Petrakis, Emmanuel, 2022. "The impact on market outcomes of the portfolio selection of large equity investors," Economics Letters, Elsevier, vol. 212(C).
    11. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2019. "Can partial horizontal ownership lessen competition more than a monopoly?," Economics Letters, Elsevier, vol. 176(C), pages 90-95.
    12. Dai, Miao & Benchekroun, Hassan & Long, Ngo Van, 2022. "On the profitability of cross-ownership in Cournot nonrenewable resource oligopolies: Stock size matters," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    13. Vives, Xavier, 2020. "Common ownership, market power, and innovation," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    14. Heijnen, Pim & Schoonbeek, Lambert, 2020. "Cross-shareholdings and competition in a rent-seeking contest," International Journal of Industrial Organization, Elsevier, vol. 71(C).
    15. José Azar & Sahil Raina & Martin Schmalz, 2022. "Ultimate ownership and bank competition," Financial Management, Financial Management Association International, vol. 51(1), pages 227-269, March.
    16. Filomena Garcia & Jose Manuel Paz y Miño & Gustavo Torrens, 2020. "The merger paradox, collusion, and competition policy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(6), pages 2051-2081, December.
    17. Oz Shy & Rune Stenbacka, 2020. "Common ownership, institutional investors, and welfare," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(3), pages 706-723, July.
    18. Panagiotis N. Fotis & Michael L. Polemis & Konstantinos Eleftheriou, 2017. "Unilateral effects of partial acquisitions: consistent calculation of GUPPI under horizontal merger guidelines within the EU," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(3), pages 315-325, September.
    19. Hunold, Matthias & Schlütter, Frank, 2019. "Vertical financial interest and corporate influence," DICE Discussion Papers 309, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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    More about this item

    Keywords

    Oligopolis; Monopolis; 33 - Economia;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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