The Prohibition of the Proposed Springer-ProSiebenSat.1-Merger: How much Economics in German Merger Control?

Springer-ProSiebenSat.1-Merger

Anticompetitive concerns in neighbouring markets typically refer to leveraging prob-
lems, i.e. the leverage of market power from one market into another one (Nalebuff
2005). Standard instruments are fourfold (Church 2004: 130):

- Tying occurs when the purchase of good A requires that costumers also purchase
good B.

- Pure bundling is quite similar to tying, referring to the case where customers can
buy a good A only in a bundle with product B.⁷ Mixed bundling occurs if A and B
can be bought individually but customers have to pay a higher price compared to
the bundled offer.

- Foreclosure can occur in the meaning of “not supplying a rival with access to the
complements controlled by the conglomerate: if consumers value variety, then the
variety advantage can provide the conglomerate with market power or lead to mo-
nopolization” (Church 2004: 130) (Ma 1997; Church/Gandal 2000).

- Financial leverage and predation.

Tying and bundling can produce anticompetitive effects if the merger involves (or
creates) a dominant firm in one of the markets, which is additionally protected by
entry barriers (Church 2004: 148-219; Tirole 2005). Then, under certain circum-
stances, market power in market A can be leveraged into market B through tying
strategies (Whinston 1990; Tirole 2005). Furthermore, tying can be employed to
maintain or enhance market power in market A, for instance, by preventing entry into
market A (Whinston 1990; Carlton/Waldman 2002). Additionally, negative welfare
effects might result from the effects of tying strategies on innovation (Farrell/Katz
2000; Choi/Stefanadis 2001; Choi 2004). Under the aforementioned assumptions,
bundling strategies, on the one hand, might lead to relaxing price competition through
segmenting the market with competitive pressure, creating niches of monopoly (Car-
bajo et al. 1990; Seidmann 1990; Chen 1997). On the other hand, bundling might cre-
ate strategic substitutes (i.e. the bundles being more substitutional than the original
products) (Martin 1999), thus offering scope for quasi-horizontal exclusionary ef-
fects. If the affected markets can be viewed as markets for components of a system,
then a conglomerate merger across the component markets creates one integrated sys-
tem supplier (which cannot be copied because it incontestably dominates one of the
component markets; remember assumptions at the beginning of this paragraph), offer-
ing various avenues to employ exclusionary practices including artificial incompati-
bilities (Denicolo 2000; Nalebuff 2000; Choi 2004).

Although conglomerate mergers in neighbouring markets entail an increased prob-
ability of anticompetitive effects of these types when compared to conglomerate
mergers in non-related markets, still efficiency rationales may speak in favour of such
a combination of assets. Consumers might benefit from distribution cost savings,
compatibility cost savings, information and liability advantages as well as market

The difference occurs in terms of divisibility: bundling includes prescribed quantity relations (e.g.
you can buy two units of A in a bundle with four units of B). Tying does not allow this.

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