1 July 2014

Drink deriving: estimating substitution patterns

The UK Office of Fair Trading (OFT) and Competition Commission (CC), since 1 April 2014 combined to form the Competition and Markets Authority (CMA), have both recently
analysed high profile mergers involving branded drinks producers using demand
estimation. Specifically, both authorities employed the Almost Ideal Demand System (or
AIDS) framework to assess quantitatively whether drinks brands supplied by the merging
parties are particularly close competitors and so whether these transactions were likely to
result in a significant lessening of competition (SLC).

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