Price Pressure Indices, Innovation and Mergers Between Commonly Owned Firms

Roman Inderst and Stefan Thomas

No 16905, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The potentially anticompetitive effects of common ownership are being discussed controversially. While the US agencies still display reluctance, the Commission has already invoked common ownership has part of a theory of harm in Dow/DuPont and Bayer/Monsanto. In our paper we focus on how common ownership can bear on the application of price pressure indices in unilateral effects analysis of horizontal mergers between portfolio companies. We do not assess whether the underlying premise of common ownership to lead to an internalization of shareholders’ expectations of high overall market returns is convincing. Rather, we hypothesize such common shareholder influence. Our main conclusion is that common ownership should still not be considered a general circumstantial factor indicating competitive harm with respect to post-merger price increases or effects on innovation competition. Rather, it calls for case-by-case analysis.

Keywords: Common ownership; Herfindahl-hirschman index; Horizontal effects; Innovation competition; Merger control; Unilateral effects; Upward pricing pressure (search for similar items in EconPapers)
JEL-codes: L21 L22 L41 (search for similar items in EconPapers)
Date: 2022-01
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