Compensating Marginal Cost Reduction

Analytics

In a previous case study, we examined how the Federal Trade Commission (FTC) successfully prevented the proposed acquisition of Albertsons Companies, Inc. by the Kroger Company. During the litigation, the FTC's economic expert utilized an analysis known as compensating marginal cost reduction (CMCR) analysis to demonstrate that the efficiencies gained through marginal cost reductions from the proposed transaction would not compensate for any potential price increases. The defendant's economic expert argued that the CMCR analysis was somewhat limited due to inaccurate input, which differed from the estimates provided by the defendant's own economic expert. Ultimately, the court affirmed the findings of the plaintiff's economic expert.