In recent years there has been a growing trend towards the use of quantitative techniques in UK and EU competition law. Price Concentration Analysis ('PCA') is one such technique which has played an important role in a number of recent high profile merger cases at both the UK and EU level. It has also played a decisive role in a number of recent market investigations in the UK, which has led to remedies (including divestments) being imposed, and specific data rooms being set up so that the analysis can be closely scrutinized by the parties' economists.
The appeal of PCA is that it provides a quantitative way of assessing the extent to which prices (or margins) are affected by market concentration, and has wide applicability in a range of situations. However, the increasing use of PCA by the UK and EU competition authorities, and the growing weight that is attached to the results of this type of analysis, means that all practitioners (and not just the economists) need to understand both the benefits and pitfalls of this quantitative technique. This article seeks to provide a non-technical explanation of the mechanics and uses of PCA, and to highlight some of the key issues and sensitivities that arise with this type of analysis.World Competition