Portfolio Effects and Merger Control: Full-line Forcing as an Entry Deterrence Strategy

Thibaud Vergé ()

Industrial Organization from EconWPA

Abstract: The ''portfolio effect theory'' developed by the European Commission in merger control is at the center of a fierce international row with the US authorities who believe that this theory has no economic foundations. This paper aims to provide a counter-argument and shows that full-line forcing may be used by the holder a comprehensive range of products as an entry deterrence device to maintain its monopoly power. However, due to buyer power on the retail market, this will happen only if entry is not profitable for the industry as a whole. The effects on consumer welfare are ambiguous. Full-line forcing will reduce prices in the first period, but as it helps maintaining monopoly power, is harmful in the long-term.

Keywords: Portfolio effects; competition policy; full-line forcing; entry deterrence. (search for similar items in EconPapers)
JEL-codes: L4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com
Date: 2003-01-22
Note: Type of Document - Pdf; prepared on PC-ScientificWord; to print on Postscript; pages: 24 ; figures: included
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0301010

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