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Roll on demand estimation: the EC’s empirical analysis in Unilever/Sara Lee

Bojana Ignjatovic and Tania van den Brande, RBB Brief 39, May 2012.

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The European Commission’s decision on Unilever/Sara Lee represents an important step in the use of merger simulations in assessing mergers, placing greater prominence on such analysis than in previous cases where this approach has been used. Estimating price effects from a merger sounds like a panacea for merger control: in most merger cases, this is the central question that merger analysis seeks to answer. However, as we discuss in this Brief, several factors limit the ability of such modelling approaches to provide precise estimates of actual likely price effects, while the bias associated with any simulated price effects will depend on case specific factors. As a result, it is crucial that merger simulation results are not viewed in isolation from other forms of evidence, and that the thresholds for intervention as applied in Unilever/Sara Lee do not become an automatic benchmark for future mergers where these techniques are applied.

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