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Business Articles Awards > Economics

To Bid or Not to Bid, That is the Question: The Assessment of Bidding Markets in Merger Control

David Wirth, The International Comparative Legal Guide to: Merger Control, 2016

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Many markets are characterised by an auction process in which customers issue tenders for contracts and suppliers bid against each other in order to win that contract. Prices in such markets, which are commonly referred to as bidding markets, are typically individually determined for each contract, and the buyer (i.e. the tendering authority) is able to compare offers and negotiate with the different competing bidders.The nature of bidding markets involve market features and dynamics which differ from ordinary markets (i.e. where prices are set individually by each supplier and customers decide whether or not to purchase the goods or services in question). This, in turn, can have an impact on the nature of the competitive assessment in those markets, particularly in the context of the assessment of mergers between competing suppliers. However, a detailed discussion of bidding markets is noticeably absent from the merger guidelines of a number of competition authorities around the world. The aim of this chapter is not to provide a detailed exposition of the economics of auction theory, but to outline the nature of the competition issues that often arise in bidding markets, and to summarise the type of empirical evidence that can be presented to inform the assessment of the competitive effects of mergers in such markets. The rise in the number of markets that involvetender processes (particularly in e-commerce and business-tobusiness markets) suggests that the economics of bidding markets is becoming increasingly important to merger control and should be given more consideration in the competition authorities’ guidelines.

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