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Scale Economies and Synergies in Horizontal Merger Analysis

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Author Info
Carl Shapiro (Haas School of Business and Economics Department, University of California, Berkeley)
Joseph Farrell (Economics Department, University of California, Berkeley)

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Abstract

Three years ago, the Antitrust Division and the Federal Trade Commission revised their Horizontal Merger Guidelines to articulate in greater detail how they would treat claims of efficiencies associated with horizontal mergers: claims that are frequently made, as for instance in the recently proposed merger between Heinz and Beech-Nut in the market for baby food. While these revisions to the Guidelines have a solid economic basis, they leave open many questions, both in theory and in practice. In this essay, we evaluate some aspects of the treatment of efficiencies, based on three years of enforcement experience under the revised Guidelines, including several litigated mergers, and based on economic principles drawn from oligopoly theory regarding cost savings, competition, and consumer welfare.

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Publisher Info
Paper provided by Competition Policy Center, Institute for Business and Economic Research, UC Berkeley in its series Competition Policy Center, Working Paper Series with number CPC00-015.

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Date of creation: 01 Oct 2000
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Handle: RePEc:cdl:compol:cpc00-015

Note: oai:cdlib1:iber/cpc-1011
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Keywords: competition; FTC; horizontal merger guidelines; mergers; no-synergies efficiencies; synergy;

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  1. D. Dragone & L. Lambertini & A. Mantovani, 2006. "Horizontal Mergers with Scale Economies," Working Papers 571, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
  2. Vasconcelos, Helder, 2007. "Efficiency Gains and Structural Remedies in Merger Control," CEPR Discussion Papers 6093, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Simona Fabrizi & Steffen Lippert, 2003. "Moral Hazard and the Internal Organization of Joint Research," DFAEII Working Papers 200310, University of the Basque Country - Department of Foundations of Economic Analysis II, revised 28 Jun 2006. [Downloadable!]
    Other versions:
  4. Johan N. M. Lagerlöf & Paul Heidhues, 2004. "On the Desirability of an Efficiency Defense in Merger Control," Royal Holloway, University of London: Discussion Papers in Economics 04/24, Department of Economics, Royal Holloway University of London, revised Oct 2004. [Downloadable!]
    Other versions:
  5. Ivaldi, Marc & Motis, Jrissy, 2007. "Mergers as Auctions," CEPR Discussion Papers 6434, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. Albert Banal-Estaño & Inés Macho-Stadler & Jo Seldeslachts, 2004. "Mergers, Investment Decisions and Internal Organisation," CIG Working Papers SP II 2004-13, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
    Other versions:
  7. Oliver Budzinski & Jürgen-Peter Kretschmer, 2009. "Horizontal Mergers, Involuntary Unemployment, and Welfare," MAGKS Papers on Economics 200907, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). [Downloadable!]
    Other versions:
  8. Paul W. Dobson & Claudio A. Piga, 2009. "Mergers and Business Model Assimilation: Evidence from Low-Cost Airlines Takeovers," Discussion Paper Series 2009_2, Department of Economics, Loughborough University, revised Feb 2009. [Downloadable!]
  9. Goppelsroeder, M. & Schinkel, M.P. & Tuinstra, J., 2006. "Quantifying the Scope for Efficiency Defense in Merger Control: The Werden-Froeb-Index," CeNDEF Working Papers 06-09, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance. [Downloadable!]
  10. D. Dragone & L. Lambertini & A. Mantovani, 2007. "Antitrust Guidelines: A Simple Operational Method for Evaluating Horizontal Mergers," Working Papers 591, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
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