Monday, May 4, 2009
Posted by D. Daniel Sokol
Herb Hovenkamp,University of Iowa College of Law has a must read piece for those looking for a clear and non-technical overview of Analyzing Horizontal Mergers: Unilateral Effects in Product-Differentiated Markets.
ABSTRACT: This essay offers a brief, non-technical exposition of the antitrust analysis of horizontal mergers in product differentiated markets where the resulting price increase is thought to be unilateral - that is, only the post-merger firm increases its prices while other firms in the market do not. More realistically, non-merging firms who are reasonably close in product space to the merging firm will also be able to increase their prices when the post-merger firm's prices rise. The unilateral effects theory is robust and has become quite conventional in merger analysis. There is certainly no reason for thinking that it involves any more conjecture than what occurs in traditional concentration-increasing merger analysis. Nevertheless, as with all predictions about mergers, we must live with a certain measure of uncertainty.