Did the Canadian Newspaper Acquisitions Raise Prices for Consumers

Posted by D. Daniel Sokol

Oftentimes with merger control, we may question how accurately antitrust can be when it is forward looking.  A new working paper by Ambarish Chandra of the Sauder School of Business of the University of British Columbia and Allan Collard-Wexler of the Stern School of Business of New York University examines the effects of a series of mergers in the Canadian newspaper industry to determine potential anti-competitive effects of consolidation.  It is titled Did the Canadian Newspaper Acquisitions Raise Prices for Consumers.

ABSTRACT: In the late 1990s, the Canadian newspaper industry underwent rapid consolidation with a few conglomerates controlling the vast majority of daily papers. Over a 4 year period, about three-fourths of Canada's daily newspapers changed ownership. While the issue received considerable attention and criticism at the time, the concerns were mostly about diversity of opinion. We have not found any study examining the straightforward economic implications of such a large scale realignment in this important industry.

We examine the effect of this consolidation on observable variables relating to consumer welfare. Specifically, we analyze prices for both circulation and advertising, as well as study the extent to which concentration increased using county level circulation data. Our results do not support the notion that greater concentration led to the abuse of market power in the form of higher prices. In fact, our results suggest that newspapers with changed ownership and those in the dominant chains had either lower price increases or greater price declines after the merger, compared with the other papers