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Price Pressure Indices, Innovation and Mergers Between Commonly Owned Firms

Author

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  • Inderst, Roman
  • Thomas, Stefan

Abstract

The potentially anticompetitive effects of common ownership are being discussed controversially. While the US agencies still display reluctance, the Commission has already invoked common ownership has part of a theory of harm in Dow/DuPont and Bayer/Monsanto. In our paper we focus on how common ownership can bear on the application of price pressure indices in unilateral effects analysis of horizontal mergers between portfolio companies. We do not assess whether the underlying premise of common ownership to lead to an internalization of shareholders’ expectations of high overall market returns is convincing. Rather, we hypothesize such common shareholder influence. Our main conclusion is that common ownership should still not be considered a general circumstantial factor indicating competitive harm with respect to post-merger price increases or effects on innovation competition. Rather, it calls for case-by-case analysis.

Suggested Citation

  • Inderst, Roman & Thomas, Stefan, 2022. "Price Pressure Indices, Innovation and Mergers Between Commonly Owned Firms," CEPR Discussion Papers 16905, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:16905
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    More about this item

    Keywords

    Common ownership; Herfindahl-hirschman index; Horizontal effects; Innovation competition; Merger control; Unilateral effects; Upward pricing pressure;
    All these keywords.

    JEL classification:

    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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