Experience

In 2015, Holcim of Switzerland merged with Lafarge of France to become the world’s largest cement producer, with operations in 90 countries. E.CA Economics assisted the merging parties through the course of the regulatory proceedings in Europe and in various non-European countries like Indonesia and Brazil. The merger impact assessment focussed strongly on the geographic scope of competition, since most construction materials are sold within a relatively short distance from the manufacturing site. The European Commission ultimately cleared the merger, despite its complexity, in Phase I on a conditional basis, ordering the implementation of a package of divestments encompassing multiple countries and including various assets.

The case dates back to 2006, when the European Commission fined rubber manufacturers including Dow, ENI, Shell and Bayer more than €500 million for price-fixing over a period of six years. E.CA Economics supported a coalition of leading tyre manufacturers who were claiming damages in English courts as direct customers of the ESBR/BR (types of synthetic rubber) cartel. One of E.CA’s directors, supported by a team of economists from both E.CA and our US partner Bates White, acted as an economic expert in the English High Court. Based on time-series econometric techniques, overcharges were estimated and tyre costs and price data were examined to assess whether and to what extent overcharges were passed on. After intensive negotiations and a court action that spanned over a period of more than seven years, the litigation ended by settlement.

The EU Commission recently introduced new obligations for the ex-post evaluation of State aid schemes for member states. To prepare for upcoming submissions to the Commission, the German Federal Ministry for the Environment and the associated Environmental Agency engaged E.CA Economics and the law firm Redeker Sellner Dahs for an interdisciplinary research project on ex-post evaluations of environmental aid. To assess the probability with which the Commission would request an ex-post evaluation of an environmental State aid scheme, the team designed a novel warning system. Moreover, a roadmap helping to steer the organisation, scope and timing of an ex-post evaluation by the ministry was developed. The most important methodical issues when carrying out an ex-post evaluation were explained using examples of environmental aid schemes. The legal analysis included the data-protection framework for upcoming ex-post evaluations.

On 26 August 2015, Germany’s Federal Cartel Office (FCO) ruled that certain provisions of ASICS’ selective distribution system relating to online advertising violated competition law. ASICS appealed this decision at the Dusseldorf Regional Court of Appeals, which confirmed the FCO decision in April 2017. E.CA Economics provided economic assistance to ASICS by identifying and substantiating the potential efficiencies of the company’s online-advertising provisions, which were related to free-rider problems and brand-image protection. For example, one of the provisions barred authorised distributors from providing support to price-comparison websites. At the time the new distribution system was implemented, price-comparison websites generally had limited functionality and poor privacy and consumer-protection standards. Some customers had reported that they had been misled regarding purchases. The appearance of a company’s products on these websites thus carried a serious risk of harm to the brand’s image. Although the Dusseldorf Court confirmed the FCO decision, a broader debate has emerged in Europe regarding vertical restraints in the context of online sales.

In July 2014 following an in-depth investigation, the European Commission conditionally approved Telefónica Deutschland’s proposed acquisition of German mobile telecommunications business E-Plus, at that time owned by the Dutch company KPN. The Commission’s main concern was that the merger would eliminate competition between two rival firms, thus removing important competitive forces from Germany’s mobile telecommunications market. An additional concern was that the merger would further weaken the position of mobile virtual network operators (MVNOs) and service providers. Drawing on its substantial experience in the telecommunications sector, E.CA Economics carried out detailed economic and econometric analyses for the merging parties in various areas, including closeness of competition, diversion ratios, upward pricing pressure and operational efficiencies.