Mergers and Market Dominance

Abstract

Mergers involving dominant firms legitimately receive close scrutiny under the antitrust laws, even if they involve tiny firms. Further, they should be examined closely even in markets that generally exhibit low entry barriers. Many of the so-called "unilateral effects" cases in current merger law are in fact mergers that create dominant firms. The rhetoric of unilateral effects often serves to disguise this fact by presenting the situation as if it involves the ability of a small number of firms (typically two or three) in a much larger market to increase their price to unacceptable levels. In fact, if such a grouping of firms can achieve an unacceptably high price increase for an unacceptable length of time, that grouping is best viewed as a relevant market unto itself.

Keywords: Antitrust, Monopoly, Mergers, Competition

JEL Classification: K00, K2, K21, L4, L41, J3