Assessing the competitive effects of convergence mergers : the case of the gas-electricity industries

Sammanfattning: The main purpose of this thesis has been to evaluate how the competitive effects following a convergence merger and in particular a gas-electricity merger, should be detected. This was done by employing and critically evaluating two methods proposed by Brennan (2001) and Hunger (2003), both specially designed for analysing convergence mergers and between gas and electricity utilities. The guidelines proposed by these methods were first employed on a merger in the context of a hypothetical gas-electricity market situations and secondly on the European merger between E.ON Energie AG and Ruhrgas. The German competition authority has already approved this latter merger. The analyses came to different conclusions regarding one of the hypothetical merger cases. The difference in outcome stems from a change in pre-merger market power between the gas supplier and the acquiring generator, and such a change is not recognised in the guidelines proposed by Hunger (2003). The analysis did not allow us to draw any conclusions about what guideline led to the correct conclusion regarding the competitive impacts of the merger. We can only stress the fact that these guidelines are more or less sensitive to changes in different relations in the markets where the merger takes place. The two methods also, at least partly, rely on different types of data, some of which can be more or less hard to obtain. This latter point became obvious in the analysis of the E.ON/Ruhrgas merger since some information needed to perform the analysis as proposed by Brennan (2001) was not available for the German market. This forced us to build the merger analysis on several assumptions based on the available information. However, given the information at hand the results in general suggest that the E.ON/Ruhrgas merger gives rise to anticompetitive concerns. Still, additional information about the markets and its would have allowed us to pinpoint in more detail areas where the risk for anticompetitive concerns was particular large. This indicates that one should be careful in basing convergence merger analysis on one single method.