Original Research

Bargaining power and market definition: A reflection on two mergers

Simon Roberts, Catherine Corbett, Reena das Nair
Journal of Economic and Financial Sciences | Vol 4, No 3 | a371 | DOI: https://doi.org/10.4102/jef.v4i4.371 | © 2018 Simon Roberts, Catherine Corbett, Reena das Nair | This work is licensed under CC Attribution 4.0
Submitted: 01 July 2018 | Published: 31 August 2011

About the author(s)

Simon Roberts, Centre for Competition Economics, University of Johannesburg; and Competition Commission, South Africa
Catherine Corbett, Competition Commission, South Africa
Reena das Nair, Centre for Competition Economics, University of Johannesburg; and Competition Commission, South Africa

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Abstract

When assessing whether a merger is likely to substantially prevent or lessen competition, the Competition Act, No. 89 of 1998, as amended, specifies that the Commission should assess the strength of competition by taking into account the degree of countervailing power in a market. We highlight the importance of understanding this in terms of the factors underlying bargaining power, such as the alternative sources of supply available to buyers, the alternative sources of demand to sellers, cost structures, and information asymmetries. To do this we critically compare the approach adopted by the Competition Tribunal in evaluating two mergers: Sasol/Engen and Chlor-Alkali Holdings/Botash. We find that in both cases an analysis of bargaining power should play an important part in the assessment of the effects on competition, including the identification of competitive constraints that fall within market definition.

Keywords

countervailing power; bargaining power; buyer power; outside options; market definition; market power; merger analysis; unilateral effects

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