Chopping Off The Tail: Similar Products, Different Constraints?

In merger analysis, should competition authorities include a "long tail" of small competitors – or should they "chop it off"?

Usually, the answer is not in the size of competitors – but in how other factors, such as product range and geographical coverage, affect customers' preferences. In this article, Andy Parkinson and Martin Wickens¹ lay out four ways in which economics can bring rigour to the assessment.

Introduction

In any merger, competition authorities seek to identify which competitors constrain the merging parties, and how closely they compete. Those constraints matter for market definition and for the competitive assessment.² Sometimes, answering the question is straightforward. But not always: a "long tail" of small firms producing similar products can complicate the assessment of competitive constraints. On the one hand, one might be tempted to include the tail, on the basis that they sell a similar product. On the other hand, one might seek to