INTERNATIONAL POLICY EXAMPLE Relevant Illegal Competition Complicates Merger Evaluations in Latin America In many parts of the world, sellers that governments have not legally is biased significantly by exclusion of these competitors. The unauthorized authorized to participate in the market nonetheless are major competi- presence of illegal sellers of television subscription services constitutes tors whose combined activities can capture large market shares. Never- economically relevant competition for the legally authorized sellers-and theless, government agencies charged with antitrust enforcement certainly is relevant to about half of Peruvian subscribers to these typically define relevant markets only in terms of the market shares of services. legally authorized firms. For instance, current estimates indicate that almost one-third of all FOR CRITICAL THINKING buyers of cable and satellite television services in Latin America pur- Does the failure of antitrust authorities to include illegal but economi- chase services from providers that are not legally authorized to operate. cally relevant competitors when computing an industry HHI for merger In the South American nation of Peru, unauthorized sellers provide about analysis yield an HHI value that is biased upward or downward? Explain 50 percent of all subscription television services. The HHI value calcu- briefly. lated for a relevant market that government antitrust officials define solely in terms of legally authorized sellers of these services consequently Sources are listed at the end of this chapter