Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Tuesday, January 8, 2019

Collusion, Mergers and Antitrust Policy

Filomena Garcia, Indiana University; ISEG - Technical University of Lisbon; UECE - Research Unit in Economics and Complexity, Jose Manuel Paz y Miño, Indiana University Bloomington, Gustavo Torrens, Indiana University study Collusion, Mergers and Antitrust Policy.

ABSTRACT: This paper develops a model that formalizes several connections between mergers, collusion and antitrust policy. In equilibrium, firms may merge to make collusion sustainable when it cannot be sustained with the original set of firms. A rise in the probability of detecting and prosecuting collusion could induce a wave of mergers, so firms can sustain collusion again. Indeed, mergers could fully neutralize the pro-competitive effect of an improvement in collusion detection and prosecution. From a normative perspective, we show that merger policy is crucial when cost synergies are small (or nonexistent) and the competition authority can only deter collusion by restricting mergers. Finally, we highlight that mergers could be more harmful (less beneficial) than expected if the impact that mergers have on the competition regime is properly considered, which suggests a formal definition for the notions of unilateral and coordinated effects associated with mergers.

https://lawprofessors.typepad.com/antitrustprof_blog/2019/01/collusion-mergers-and-antitrust-policy.html

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