SE-5008M
Industrial Organisation
2012/3 LEVEL 2
Assessment: One essay of 1,500 – 2,000 words
- Failure to submit a hard copy of your work by this deadline will result in a mark of 0%
- The assignment must also be submitted in electronic format to the ‘Turnitin’ drop-box in the Blackboard site for this module and the Turnitin reference code added to the hand-in sheet
- You are advised to plan your work carefully and back-up your work. Computing and printing problems will NOT be accepted as reasons for non-submission
- For your information when preparing your coursework essay, refer to the following:
- University Regulation on the Presentation of Work for Formal Assessment
- Student Handbook on Plagiarism – remember to fully reference your work in the Harvard format.
Division of Economics 2012/13
University of Bradford Semester 2
Industrial Organisation (SE-5008M)
Please answer both questions below and submit your work no later than 3pm on Tuesday 30 April 2013.
The required length is 1500-2000 words. This essay counts for 100 per cent of the final module mark:
Background Information
(1) In January 2011 Kerry Foods Limited took over the frozen ready meals business of Headland Foods Limited. Before the merger the two firms were roughly equal in size, with somewhere around a quarter of the UK market each. The third largest supplier was Heinz Foods with about 12 per cent, followed by five further firms with about 12 per cent between them and a fringe of smaller firms accounting for the last 20-30 per cent of the market. [This information is taken from Paragraph 46 of Appendix C of the Competition Commission report cited below; for commercial reasons the figures are deliberately vague.]
(2) On 12 July 2011 the completed acquisition was referred to the Competition Commission by the Office of Fair Trading for investigation and report. The OFT does this where it believes that (1) “a relevant merger situation has been or will be created” and (2) “the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets for goods or services in the UK” (quotations taken from the OFT website; emphasis added). The Competition Commission published its final report on 2 December 2011.
Questions
(a) In what ways does economic theory suggest that a “substantial lessening of competition” might result from a merger like that between Kerry and Headland? What would the likely consequences be?
(b) Does the final report into the merger, and other relevant evidence published by the Competition Commission and others, suggest that the possible effects on competition that you identified in part (a) are actually present in this particular merger? Why, or why not?
Notes for guidance
Textbooks will provide basic information on the relevant economic theory and the effects of concentration in a market like the one under consideration here. You may want to consult industrial economics texts such as those on the reading list for this module.
For access to the Competition Commission’s Final Report on the Kerry/Headland merger, go to http://www.competition-commission.org.uk/assets/competitioncommission/docs/2011/kerry-headland/kerry_headland_final_report_excised.pdf. There are various other supporting documents there too. Most of them do not look very useful for this essay, but the Appendices and Glossary are worth consulting. You will also find useful information on the OFT website at www.oft.gov.uk/OFTwork/mergers/decisions/2011/kerry.
Good answers will focus on the particular features of the market structure being examined, both in the theoretical part (a) and the applied part (b) of the question.
