LOCAL OR NATIONAL PRICING: WHAT CONSEQUENCES FOR MERGER CONTROL IN THE FOOD RETAIL SECTOR?

The food retail sector is characterized by highly localized competition among multi-market retailers. Multi-store retailers may either price-discriminate spatially (focal pricing) or adopt a uniform pricing strategy among local markets. We analyze how this choice affects the effect of a merger on consumer surplus. We show that when one retailer adopts uniform pricing across stores, the anticompetitive effect of the merger on consumer welfare spreads on markets non directly affected by the merger. In addition, the effect of the merger on directly affected markets is enhanced when these markets are sufficiently more competitive than markets non directly affected by the merger. These results lead to reconsider the definition of relevant markets in merger control when one multi-market retailer uses uniform pricing.