RBB was retained by Carlton Communications plc and its legal advisers to provide economic advice in support of its merger with Granada plc, which was referred by the UK’s Office of Fair Trading to the Competition Commission. Carlton and Granada together operate eleven of the fifteen ITV franchises in the United Kingdom, and sell advertising airtime on behalf of the remaining four licensees. Thus, a united company would be responsible for the sale of all of ITV’s advertising, accounting for around 50% of total TV advertising revenue. This led to concerns that the merged company would be able to increase the price of advertising on TV.

RBB undertook a detailed appraisal of competition in the TV market in order to assess the competitive effects of the merger. This economic assessment involved modelling competitive interaction in the industry, supported by empirical analysis of industry-wide and client-specific data. A company with a 50% share of a market would normally be presumed dominant, with sufficient market power to raise prices. However, the economics of the market for the sale of TV airtime is unusual in a number of respects. In particular, the total supply of airtime is regulated, and this has resulted in a distinctive pricing mechanism being adopted. As a result, the merged company would be unable to reduce supply in order to raise prices, meaning that standard merger concerns did not apply in this case.

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RBB was instructed to provide economic advice during the acquisition by General Electric Medical Systems (GE) of Instrumentarium, a leading hospital equipment manufacturer. The European Commission, which considered the case, was initially concerned about the high post-merger market shares in a number of product markets, including those encompassing various types of patient monitoring and X-ray machines. The Commission was also concerned that the transaction might remove a particularly close competitor from the market, and this might allow GE to raise price after the merger.

In a market where competition takes place through tenders placed by hospitals, the most appropriate way to test the closeness of competition between the various suppliers is to perform a win/loss analysis. In particular, if the data reveal that each merging party does not often rank as ‘runner-up’ behind the other party, this may suggest that the two companies do not provide a unique competitive constraint on each others’ behaviour, and that therefore adverse unilateral effects are unlikely. RBB performed a detailed win/loss analysis as well as other more sophisticated econometric tests, drawing on a large database of tender information collected by the two parties. That analysis addressed the Commission’s initial competitive concerns with regard to most of the affected markets, with the exception of that for perioperative patient monitors, where a structural remedy allayed remaining concerns.