Collective Dominance and Collusion
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Collective Dominance and Collusion

Parallelism in EU and US Competition Law

  • New Horizons in Competition Law and Economics series

Marilena Filippelli

By examining the issue of collusion in EU and US competition law, this book suggests possible strategies for improving the antitrust enforcement against parallelism, by exploiting the most advanced achievements of economic analysis.
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Chapter 5: Airtours and its aftermath

Marilena Filippelli

Extract

The Airtours case about oligopolistic mergers is a very crucial step in the evolution of collective dominance and, more broadly, for the entire European antitrust system. The conditions listed in the Airtours judgment for the inference of coordinated effects have become a standard, applied to dealing with collective dominance in both the ex ante and ex post perspectives. Moreover, the Commission attempt at expanding antitrust control on all oligopolistic mergers, including those resulting in non-collusive effects, highlighted the existence of a gap in EU merger control. The antitrust debate that followed this decision resulted in a change in EU merger control. In fact, a new Merger Regulation was enacted addressing all oligopolistic mergers, including those resulting in unilateral effects. In 1999 Airtours launched a takeover bid to achieve control of First Choice. Both companies operated in the market for tour operators, travel agencies, charter airlines and hotels; however, the merger project involved only the market for short-haul foreign package holidays, which include return travel and accommodation, and the market for distribution of airlines services – which consisted in supplying seats on charter flights to the tour operators. According to the Commission, to profitably operate on those markets, each company needed to correctly define its output; on the one hand, in fact, undertakings could lower their costs, and possibly lower their price, only by operating at a high level of capacity; on the other hand, it was necessary to avoid overproduction that, in the presence of perishable goods, amounted to pure losses for companies.

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