Senior Associate Ian Cass and Senior Consultant Dr. Dimitri Dimitropoulos have coauthored an article on the unique implications of consumer price sensitivity for merger assessment in Canada for the Canadian Bar Association’s (CBA’s) Canadian Competition Law Review.
In the article, the authors explain how the elasticity of demand can differentially affect estimated price effects and deadweight loss arising from a merger. In Canada, the elasticity of demand typically factors into a merger effects analysis in two ways: through a price effects analysis and an anticompetitive effects analysis. All else being equal, higher elasticity leads to lower merger–induced price effects, but the authors show that the direction and magnitude of the corresponding impact on deadweight loss depends on case-specific facts and economic modeling assumptions. In certain circumstances, the deadweight loss arising from a merger can be an “inverted U-shaped” function of the elasticity of demand. This has important implications for merging parties and their advisors, especially when asserting an efficiencies defense under Section 96 of the Canadian Competition Act.
The full article, “A Note on the Unique Implications of Consumer Price Sensitivity for Merger Assessment in Canada,” is available below.