1. Introduction
In 1999 the Swedish truck manufacturer Volvo announced its plans to purchase Scania, its main competitor in northern Europe. This purchase would have made Volvo the largest European manufacturer of heavy trucks as well as the second largest bus manufacturer in Europe and should prepare Volvo for an expansion to the new eastern european markets. The European Economic Commission (hereafter EEC) however came to the conclusion that such a concentration would impose an unreasonable burden on heavy duty truck and bus consumers, especially in the Northern European countries Sweden, Denmark, Finland, Norway and Ireland. Hence it denied the merger.
This paper’s purpose is thus to follow the decision process and the justification of the EEC. It does so by first describing the truck and bus industry separately within the relevant markets, then giving an oversight on competition policy and microeconomic backgrounds, and finally by concluding on the EECs decision.
2. The truck market
Within the truck market, it is an industry standard to distinguish between three market segments related to the trucks weight: the light duty segment which includes trucks below five tonnes, the medium duty segment which includes trucks with a weight between five and 16 tonnes and the heavy duty segment which includes all trucks weighing above 16 tonnes. This is done due to the fact that the technical configurations, such as for engine types, axles and payload of heavy duty trucks are very different from the medium and light duty segment. Therefore, the trucks of the upper range are not considered to be interchangeable with or substitutable for trucks of the medium or lower duty market segments by the customers. This also results in a diffe...
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...k and bus market of northern Europe. As Volvo was found to already exploit its customers through price discrimination, the Commissions decision to deny the merger can be seen as an act of consumer protection, but also as a failure to establish EEA wide markets for trucks and buses.
Works Cited
European Commission (2012). Retrieved from: http://ec.europa.eu/competition/consumers/what_en.html
European Commission, M. M. (2000, March 14). Retrieved from http://ec.europa.eu/competition/mergers/cases/decisions/m1672_en.pdf
Perloff, J. M. (2012). Microeconomics (6th ed., p. 467). Boston: Pearson.
Perloff, J. M. (2012). Microeconomics (6th ed., p. 386). Boston: Pearson.
European Commission, P. L. (2006). Preserving and Promoting Competition: A European Response. Competition Policy Newsletter, 2006(2). Retrieved from http://ec.europa.eu/comm/competition/publications/cpn/
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