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The acquisition by Michelin of a minority stake in Allopneus: MAPP assesses the competitive impact of the transaction
On 30 June 2015, the French Competition Authority ('FCA') authorised Michelin's acquisition of a minority stake in Allopneus, France's leading online seller of replacement tyres. The main questions addressed by the FCA had to do with unilateral effects, since Michelin was already active as an online seller competing against Allopneus; and vertical effects, since Allopneus and its competitors sell tyres produced by Michelin.
MAPP submitted an economic report on behalf of Michelin, which addressed these issues. We started by investigating the competitive proximity between the various online retailers. We used a statistical technique called the 'principal component analysis', which allowed us to synthesise information on the various competitors' characteristics. This led to the finding that there was significant differentiation between Michelin and Allopneus.
In order to estimate the magnitude of possible unilateral effects, we then calculated 'GUPPI' indices (gross upward pricing pressure index). This required us to make assumptions on diversion ratios, and to take into account the fact that Michelin was planning to acquire only 40% of Allopneus. We found that, even under conservative assumptions on margin levels and on the scope for substitution between the online and offline sales channels, the two relevant GUPPI indices were significantly below the threshold mentioned in the FCA's merger guidelines. The FCA's decision vindicates this approach and mentions these GUPPI estimates as one of the reasons for dispelling concerns over unilateral effects.
The decision (in French) can be downloaded at: