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ECON 308 (6)
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308 Mason Superior Notes.docx

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Department
Economics (Arts)
Course
ECON 308
Professor
Christopher Green
Semester
Winter

Description
1Mason Lessons From the SuperiorICG MergerCanadian Competition Tribunal allowed the recent Superior PropaneICG merger to proceed in spite of demonstrated anticompetitive effects because of demonstrated offsetting efficiencies At the center of Superior is the role of efficiencies in horizontal merger policy Efficiencies have a unique role in merger legislation in CanadaThe 1986 Canadian Competition Act expressly allows otherwise anticompetitive mergers if they also generate efficiencies sufficient to overcome the anticompetitive effectsSuperior was the first case since the passage of the Competition Act in which a merger found to be anticompetitive was permitted because of offsetting efficienciesMergers potentially have an impact on consumers and producers via two simple effects 1 The effect on competition generally negative if the merger increases markets power 2 The effect on the efficiency of production generally positive if the merger is to have economic benefits to shareholders and ownersTwo effects are connected because any change in production technology or costs will affect how the merged firm competes If the overall effect of the merger is that prices to consumers are predicted to rise loss of consumer surplus then the merger is said to be anticompetitive This rise in price while hurting consumers will benefit the merged firm in the form of increased profits producer surplus Producer surplus will also increase due to the increased efficiency in productionBefore Superior merger review in Canada attempted to balance the impact of anticompetitive effects and efficiencies by looking at their overall effect on total surplus consumer surplus producer surplusSuperior was the first time an efficiency defense was successfully used to allow a merger that was found to be anticompetitiveTotal Surplus and EfficienciesBefore Superior the fundamental criterion that governed horizontal merger policy in Canada was the maximization of total surplusThe total surplus criterion has 3 critical elements 1 Deadweight loss This is the loss in economic surplus that comes via the exertion of increased market power by a newly merged firm It is the economic loss to society from the anticompetitive effects of the merger2 Neutrality of transfers This means that when the merger causes a transfer of money from one member of society to another for example from consumers
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