Review of Industrial Organization 17: 209–227, 2000.
© 2000 Kluwer Academic Publishers. Printed in the Netherlands.
Deﬁning Market Dominance: A Study of Antitrust
Decisions on Business Acquisitions in New Zealand
, ALAN BOLLARD
and MICHAEL PICKFORD
New Zealand Institute of Economic Research;
New Zealand Treasury;
P.O. Box 2351, Wellington, New Zealand
Abstract. Information from the 207 decisions of the New Zealand Commerce Commission on
business acquisitions for 1991–96 are used to test how the Commission assessed market domin-
ance. Dominance is found to emerge where both the market share of the merged entity and the
entry barriers were high. A probit regression model suggests that there was a 50% probability that
dominance would be found when market share was 75%, in a market where the entry barrier was
high. The application of the US merger guidelines to a sub-set of markets ﬁnds that the dominance
threshold of anti-competitiveness applied to New Zealand mergers was very much more lenient than
the substantial lessening of competition threshold used in the U.S.
Key words: Commerce Commission, dominance, New Zealand, U.S. merger guidelines.
Market dominance is a topic of importance in both antitrust policy and industrial
organisation. As a threshold of anti-competitiveness it forms the legal benchmark
for mergers in the EU and in New Zealand (NZ) (and also, formerly, in Aus-
tralia). Monopolisation cases typically are concerned not with monopoly in the
strict economics textbook sense, but with dominant ﬁrms. In industrial organisa-
tion, dominance is the focus for the investigation of single ﬁrm market power, and
of the potential for exclusionery behaviour. Yet economists have found it difﬁcult
to deﬁne what constitutes dominance with any precision. Most who have tried
have used market share as the key criterion, but have suggested widely varying
thresholds. These range from 40% by Stigler (1947) and Geroski (1986) to a per-
sistence of a 60% ﬁgure by Williamson (1972), with Shepherd (1982) and others
Respectively, former Research Assistant, former Chairman and Chief Economist at the New
Zealand Commerce Commission. The authors emphasise that the views expressed here are personal
views, and do not necessarily reﬂect those of the Commerce Commission. It should be noted that this
paper assesses the degree to which previous dominance decisions can be statistically modelled, and
should not be taken as a guide to future Commerce Commission determinations. The authors express
their gratitude to John Preston and Jeff Hamilton for their assistance with data sources and for their
explanations of Commission business acquisition procedures; and to Dick Adam, Lewis Evans, John
Feil and two anonymous referees for their helpful comments. The usual disclaimers apply.