U.S. District Court for the District of Columbia, FTC v. Wilhelmsen, Civil Action No. 18-cv-00414-TSC

Merger: Antitrust: Competition: FTC: Market definition: Price discrimination:

Hypothetical monopolist test:

Critical loss analysis:

Aggregate diversion ratio:

Small but significant and non-transitory increase in price (“SSNIP”):

To model the course of a hypothetical monopolist, Dr. Nevo—the only economist to have performed the HMT in this case—conducted a critical loss analysis, which essentially calculates “the largest amount of sales that a monopolist can lose before a price increase becomes unprofitable.” Swedish Match, 131 F. Supp. 2d at 160. The test has three steps. First, Dr. Nevo calculated the critical loss threshold—that is, the point at which a hypothetical monopolist would lose too many customers for a SSNIP to be profitable. This step is purely mathematical—the critical loss threshold is the point at which increased profit margins resulting from an increase in price are offset by increased costs resulting from lost sales. Second, Dr. Nevo estimated the actual aggregate diversion ratio, which “represents the proportion of lost sales that are recaptured by all other firms in the proposed market as the result of a price increase . . . since these lost sales are recaptured within the proposed market, they are not lost to the hypothetical monopolist.” H & R Block, 833 F. Supp. 2d at 63. The aggregate diversion is calculated with reference to suppliers to whom lost customers would potentially take their business. Sysco, 113 F. Supp. 3d at 34. Third, Dr. Nevo compared aggregate diversion to critical loss, and if aggregate diversion exceeds critical loss, then a SSNIP would be profitable for a hypothetical monopolist. Id. (citing Swedish Match, 131 F. Supp. 2d at 160).

After running multiple trials with varying inputs, including a SSNIP of 10% (in addition to the typical 5%), Dr. Nevo found that across all cases, the highest critical loss estimate was 17.5%, and the lowest aggregate diversion ratio estimate was 90%.

In sum, the court concludes that “the supply of MWT products and services”—including BWT chemicals, CWT chemicals, and associated products and services—to Global Fleets constitutes a relevant antitrust market.

(U.S. District Court for the District of Columbia, Sept. 28, 2018, FTC v. Wilhelmsen, Civil Action No. 18-cv-00414-TSC)

La description de l’étape « Hypothetical monopolist test » de l’analyse économique dans la procédure d’examen de la question de la position dominante et de ses effets anticoncurrentiels suite à une acquisition projetée.