Scale Economies and Synergies in Horizontal Merger Analysis

UC Berkeley, Center for Competition Policy Working Paper No. CPC00-15

29 Pages Posted: 18 Feb 2004

See all articles by Joseph Farrell

Joseph Farrell

University of California, Berkeley - Department of Economics

Carl Shapiro

University of California, Berkeley - Haas School of Business

Date Written: October 2000

Abstract

Three years ago, the Antitrust Division and the Federal Trade Commission revised their Horizontal Merger Guidelines to articulate in greater detail how they would treat claims of efficiencies associated with horizontal mergers: claims that are frequently made, as for instance in the recently proposed merger between Heinz and Beech-Nut in the market for baby food. While these revisions to the Guidelines have a solid economic basis, they leave open many questions, both in theory and in practice. In this essay, we evaluate some aspects of the treatment of efficiencies, based on three years of enforcement experience under the revised Guidelines, including several litigated mergers, and based on economic principles drawn from oligopoly theory regarding cost savings, competition, and consumer welfare.

Keywords: Competition, FTC, horizontal merger guidelines, mergers, no-synergies efficiencies, synergy

JEL Classification: L40, L41, L13

Suggested Citation

Farrell, Joseph and Shapiro, Carl, Scale Economies and Synergies in Horizontal Merger Analysis (October 2000). UC Berkeley, Center for Competition Policy Working Paper No. CPC00-15. Available at SSRN: https://ssrn.com/abstract=502846 or http://dx.doi.org/10.2139/ssrn.502846

Joseph Farrell (Contact Author)

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-642-9854 (Phone)
510-642-6615 (Fax)

Carl Shapiro

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
510-642-5905 (Phone)

HOME PAGE: http://faculty.haas.berkeley.edu

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