How Scottish & Newcastle Became the U.K.’s Largest Brewer:\ud A Case of Regulatory Capture?

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Bower, Julie ; Cox, Howard (2012)

Firms engage in a multitude of interactions with the external environment, most critically with government and its regulatory agencies. Despite an extensive literature on “regulatory capture,” little attention has been paid to the interactions between merging fi rms and competition authorities. Yet the possibility of capture exists where there is a recurring series of merger investigations of one fi rm by the same authority. This analysis of the impact of political infl uence on the merger history of the brewing fi rm Scottish & Newcastle extends into a discussion of regulatory capture in the oversight of British brewery mergers during the 1980s and 1990s.
  • References (38)
    38 references, page 1 of 4

    2 Teresa da Silva Lopes, “Brands and the Evolution of Multinationals in Alcoholic Beverages,” Business History 44 (July 2002): 1-30, ascribes “merger waves” in the alcoholic beverages industry to a combination of several factors related to the evolution of the industry and also to the strategy of the firms.

    3 Terry R. Gourvish and Richard G. Wilson, The British Brewing Industry 1830-1980 (Cambridge, U.K., 1994), chart the development of the Big Six national brewer-retailers through a series of mergers of family-owned regional brewers.

    4 Monopolies and Mergers Commission (hereafter, MMC), “Scottish & Newcastle Breweries plc and Matthew Brown plc: A Report on the Proposed Merger,” Cmnd [Command of Her Majesty] 9645 (1985): 15.

    5 A chronology of the key mergers of the Big Six from 1960 is shown in MMC, “Bass plc, Carlsberg A/S and Carlsberg-Tetley plc: A Report on the Merger Situation,” Cm [Command of Her Majesty] 3662 (1997): 141.

    6 Julie Bower, “Strategic Interactions with Competition Authorities in the U.K. Alcoholic Beverages Industry,” PhD thesis, University of Warwick, 2007.

    12 George J. Stigler, “The Theory of Economic Regulation,” Bell Journal of Economics and Management Science 2 (Spring 1971): 3-21, proposes as a general hypothesis that every industry with enough political power to utilize the state will seek to control entry and retard the rate of growth of new firms. Richard A. Posner, “Theories of Economic Regulation,” Bell Journal of Economics and Management Science 5 (Autumn 1974): 335-58, distinguishes the “public interest” theory as a response to the demand from the public that markets work efficiently and fairly from a second “capture” theory that is “espoused by an odd mixture of welfare state liberals, muckrakers, Marxists and free-market economists.”

    13 Jean-Jacques Laffont and Jean Tirole, “The Politics of Government Decision-Making: A Theory of Regulatory Capture,” Quarterly Journal of Economics 106 (Nov. 1991): 1089-127.

    14 David Martimort, “The Life Cycle of Regulatory Agencies: Dynamic Capture and Transaction Costs,” Review of Economic Studies 66 (1999): 929-47, conjectures that capture is enforced through repeated interactions.

    15 Ernesto Dal Bó, “Regulatory Capture: A Review,” Oxford Review of Economic Policy 22, no. 2 (2006): 203-25, discusses political influence in the U.S. telecommunications industry.

    18Nihat Aktas, Eric de Bodt, and Richard Roll, “Is European M&A Regulation Protectionist?” Economic Journal 117 (July 2007): 1096-121.

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