Competition Policy Studies

Ex post evaluation of vertical mergers

In April 2022, the British Competition and Markets Authority (CMA) published E.CA Economics’ ex post evaluation of its approach to vertical mergers. The CMA retained us to look at four recent mergers with a vertical component and evaluate whether CMA’s assessment was reasonable and correct. We also reviewed the current thinking on vertical mergers to help the CMA learn from the latest developments.


Merger cases that have been analysed

E.CA’s evaluation reviewed four CMA assessments of vertical mergers, or mergers with a
vertical component. All took place in 2017. They were:

  1. the acquisition by a vertically integrated pig farming and pork processing operation,
    Tulip, of a large pig farm specialised in outdoor bred pigs, Easey;
  2. the acquisition by the brewer and pub owner, Heineken, of Punch pubs;
  3. the acquisition by Mastercard of the payment infrastructure provider, Vocalink; and
  4. the acquisition by the UK’s largest grocery retailer, Tesco, of the UK’s largest grocery
    wholesaler, Booker.


Key findings

E.CA found that the CMA carried out largely reasonable and correct assessments of these mergers. The following key findings aim to help the CMA fine tune its practice in the future:

Business evidence is important
Vertical mergers tend to be more complex than horizontal mergers, which means that vertical harm can be more difficult to understand. We found that in all reviewed cases there was good quality evidence, that would have helped the CMA understand the purpose of the merger. The CMA could have derived useful knowledge from this evidence for its assessment of competition concerns.

Vertical mergers are rarely isolated events
In all reviewed industries other cases of vertical consolidation were taking place within a similar time frame. The CMA would have benefitted from understanding the impact of and motivation for the mergers in a wider industry context, and from taking a more dynamic approach to the counterfactual.

Updating the vertical toolkit
The CMA’s Merger Assessment Guidelines help with some vertical cases, but may not provide sufficient guidance to tackle some of the recently formulated concerns, such as softening of competition through a vertical recoupment mechanism, or potential competition concerns in a platform market setting.

Balancing the SLC test
The CMA could be more mindful of the need to balance its SLC test with both greater interest in (and rigorous testing of) efficiencies, as well as with consistent application of the ability-incentive-effect framework for the assessment of foreclosure. The CMA could also be more thorough in its assessment of entry ans expansion.

Benefits of simplicity
The CMA tended to investigate more theories of harm for longer than we considered necessary. Given that some of the most plausible theories of harm were complex and required careful assessment, the CMA would have benefitted from focusing on a smaller number of higher likelihood concerns.



For more insights or any questions, please contact the E.CA’s experts.

These E.CA employees were also involved: Rafael Aigner, Bas Dessens, Vedika Hegde, Nicola Heusel, Raphael PoncetGiulia Santosuosso.

Click here to find the full report.