AAI is pleased to announced that articles from its multidisciplinary symposium: Non-Price Effects of Mergers has been published by the Antitrust Bulletin (Vol. 63, No. 2, June 2018). The symposium, held in June 2016, examined the increasing importance of and emphasis on non-price dimensions of competition in merger analysis. This includes the effects of a merger on competition involving product quality, variety, service, innovation, etc. Experts from law, economics, and the business schools convened to offer insights on the nature and prospective role of non-price effects in merger analysis, challenges that they pose for antitrust enforcement, and suggested approaches for highlighting and integrating such analysis into enforcement decisions and competition policy.
The symposium featured two panels and a capstone roundtable discussion. The first panel featured multidisciplinary perspectives from the economics, law, and the business schools. This panel took up issues relating to strategic management and marketing decisions, integration decisions, R&D strategy, and product positioning as they pertain to variety, quality (including privacy concerns), service offerings, and innovation. The second panel gathered experts from the enforcement community experienced in a variety of merger cases involving non-price effects. They debated the substantive and evidentiary issues involving non-price effects in merger analysis, with the goal of sketching a landscape against which non-price effects can gain traction in enforcement decision-making and inform competition policy more generally.
Abstracts of the articles are available below:
The Antitrust Bulletin
Symposium: Non-Price Effects of Mergers
Volume 63 Number 2 June 2018
Guest Editors: Gregory T. Gundlach and Diana Moss
Gregory T. Gundlach and Diana L. Moss, Non-Price Effects of Mergers: Introduction and Overview
Mergers may impact price as well as non-price forms of competition in the form of product quality, variety, service, and innovation. This special issue of the Antitrust Bulletin examines the increasing importance of non-price dimensions of competition in merger analysis, the challenges that non-price effects pose for antitrust merger enforcement, and approaches for enhancing the analysis and role of non-price competition in merger enforcement decisions and competition policy responses. This is a critical discussion that informs the debate over the importance and adequacy of the consumer welfare standard, which is the prevailing standard for evaluating the competitive effects of mergers and nonmerger conduct.
John Kwoka and Shawn Kilpatrick, Nonprice Effects of Mergers: Issues and Evidence
Antitrust analysis of mergers focuses heavily—some would say, almost exclusively—on price effects. That focus does not reflect the lesser importance of quality, variety, cost, and technological progressiveness in mergers, but rather reflects better analytical tools and predictions for price effects. This article first provides an overview of the distinctive, often problematic, issues raised in evaluating nonprice effects. It then surveys the available empirical evidence on these from merger retrospectives. The evidence suggests that mergers on average may not cause either significant improvements or significant harms in terms of nonprice outcomes. While that might seem to suggest that policy need not be unduly concerned with nonprice effects, sufficient data do not exist for statistical testing. Moreover, variation in the average effects appears large, so that in particular cases nonprice concerns may dominate.
Melissa A. Schilling, Potential Sources of Value from Mergers and Their Indicators
Firms engage in mergers for many reasons, some of which create value for both the firm’s shareholders and society, some that create value only for the firm’s shareholders, and some that fail even to do that. A considerable body of research concludes that most mergers do not create value for anyone, except perhaps the investment bankers who negotiated the deal. For a merger to create value, it will usually be necessary that one or both parties is below minimum efficient scale or has valuable underutilized assets. Furthermore, unless heavy coordination and long-term commitment are required, many sources of value from mergers can be achieved through collaboration agreements or other contracts, with less risk to the firms and to economic efficiency. This article outlines the major sources of potential value in mergers, and indicators that can give us insight into a merger’s true motives and its likelihood of creating value.
Patrick Woodall and Tyler L. Shannon, Monopoly Power Corrodes Choice and Resiliency in the Food System
The wave of mega-mergers sweeping the food, agribusiness, and retail grocery industry from seed to supermarket has accelerated consolidation and concentrated market power in the hands of only a few dominant corporations. Federal regulators have done little to curb the merger mania in these sectors, which will ultimately lower the prices farmers receive for crops and livestock and raise the prices consumers pay for food. But the consolidation also has significantly constrained the range of choices consumers have at the supermarket, prevented independent food innovators from surviving in the marketplace, amplified food safety problems, and presented challenges to the resiliency of the food system itself. This article examines the size, scale, and scope of recent mergers in the food, agribusiness, and grocery retail sectors and discusses the ramifications for consumers, farmers, and the food system.
Peter N. Golder, Debanjan Mitra, and Christine Moorman, Incorporating Quality Considerations in Merger Analysis: Why, What, When, and How?
Mergers are common occurrences reshaping the competitive landscape in many industries. Traditionally, merger analysis has focused on the impact of the merger on price. However, price analysis ignores the other half of the value proposition for customers, namely, the quality of the product or service being offered. The authors argue that merger analysis must fully incorporate quality considerations in order to understand how customers will be affected by the merger. Some mergers will promote quality, while other mergers will inhibit quality depending on a wide variety of product, market, and customer characteristics. In order to guide merger analysts in incorporating quality considerations, the authors provide a detailed framework for answering why, what, when, and how quality should be considered in merger analysis.