Econometrics

Econometrics

Econometrics

Introduction

A regression was performed explaining the demand for British Telecom services (BT volume). It was found that logarithms were required to deal with heteroskedasticity and differences to deal with serial correlation. The results were:

Dependent Variable: DL[ BTvol]

(annual differences of the logarithms of an index of BT volume)

39 observations used, 1961 to 1999, and 7 coefficients estimated.

Answers to Questions

(a) We were not able to verify Vue's assertion that customer service levels had improved as a result of the merger, as the merger was completed nearly five months before it was referred to us for investigation. The Vue cinemas we saw were clean and we saw no reason to doubt that there were good levels of service generally. However, we were offered no evidence as to how these service levels were notably different to, or better than, those generally offered in the industry (as noted in paragraph 6.18, all cinema operators we spoke to—including the former operators of the Ster circuit—told us that they competed through providing a high-quality offer).

We conclude that there are no behavioural remedies which would adequately remedy the SLC or adverse effects identified.

We conclude that divestment of either of the two cinemas in Basingstoke to a suitable purchaser would remedy both the SLC and the adverse effects identified, and is the only effective remedy. The divestment should be subject to the conditions set out in paragraphs 7.29 and 7.50. If Vue chooses to divest the Leisure Park cinema and wishes to try and effect a sale and leaseback prior to disposal then the conditions set out in paragraphs 7.55 to 7.59 should also apply.

We expect to be able to conclude undertakings with Vue to give effect to our requirements. In default of such an agreement we will order a divestment to be made.

The use of remedies in merger appraisal enables the competition agency to engage in fine tuning rather than simply blocking or approving a merger transaction. As such, remedies act as tools which enable reaping the benefits of the transaction which would otherwise be blocked. Subsequently, they play a major role in shaping the market following the transaction and ensuring a competitive environment. Remedies are commonly classified as either behavioral or structural. While structural remedies have traditionally been regarded as superior to behavioral remedies, the latter may have an important role. This paper explores the scope and limits of behavioral remedies and their potential role in conditional clearances.

The CC generally prefers structural remedies to behavioural remedies. Since the CC became responsible for imposing remedies under the EA, it has required remedies in 21 merger inquiries. It has required divestment or prohibition in 17 of these cases (As at May 2008.). The CC will select behavioural remedies where divestiture or prohibition is not feasible or would be disproportionate (although substantial uncertainty as to a suitable purchaser will not be sufficient for these purposes), where the SLC is expected to have a relatively short duration (for example the remaining duration of a contract or patent), or where relevant customer ...