The Welfare Effects of Vertical Mergers and Their Remedies

36 Pages Posted: 14 Jul 2020

See all articles by John W. Mayo

John W. Mayo

Georgetown University - McDonough School of Business

Mark Whitener

Georgetown University, McDonough School of Business; Center for Business and Public Policy, McDonough School of Business

Date Written: July 14, 2020

Abstract

This paper extends Williamson’s (1968) classic framework of the welfare effect of mergers to the case of vertical mergers, and in particular to those in which the imposition of merger conditions (remedies) may allow an otherwise anticompetitive merger to proceed. While similarities to the case of horizontal mergers without a remedies option are present, differences also arise. Most notably, for prototypical vertical mergers remedies may yield post-merger economic welfare which is higher than pre-merger levels. This suggests that remedies directed toward vertical mergers hold the promise of a more beneficial approach than in the case of horizontal mergers. This finding leads to an examination of merger remedies policy and practice. We find that antitrust enforcers historically have implicitly recognized both the economic welfare framework and the more robust role for remedies in vertical merger cases, particularly through the application of remedies aimed at preventing identified anticompetitive conduct while facilitating merger-related efficiencies. The 2020 Vertical Merger Guidelines illuminate the basis for the U.S. antitrust agencies’ substantive analysis of vertical mergers, but do not address remedies. This paper discusses principles that may be useful in formulating much-needed guidance that would unify, clarify and reinforce the agencies’ policies for remedies in vertical merger cases.

Suggested Citation

Mayo, John W. and Whitener, Mark, The Welfare Effects of Vertical Mergers and Their Remedies (July 14, 2020). Available at SSRN: https://ssrn.com/abstract=3651069 or http://dx.doi.org/10.2139/ssrn.3651069

John W. Mayo (Contact Author)

Georgetown University - McDonough School of Business ( email )

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Washington, DC 20057
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(202) 687-7310 (Fax)

Mark Whitener

Georgetown University, McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-841-3912 (Phone)

HOME PAGE: http://https://gufaculty360.georgetown.edu/s/contact/00336000014ShHlAAK/mark-whitener

Center for Business and Public Policy, McDonough School of Business ( email )

Washington, DC 20057
United States
202-841-3912 (Phone)

HOME PAGE: http://https://cbpp.georgetown.edu/people/mark-whitener/

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