a) Which agencies in the US deal with mergers? b) Market definition is very important yet...

a) Which agencies in the US deal with mergers?

b) Market definition is very important yet often controversial in merger cases. The merger guidelines discuss the issue of market definition at length. Write a couple of sentences about this issue based on what you read in the document. Is there a unique way to define a market?

c) Think and make a guess: if two firms are about to merge, would it be in their best interest to have a board market definition that includes as many firms and products as possible, or for the market definition to be narrow and include as few firms and products as possible.

d) How do the agencies define "Highly Concentrated Markets"?

e) Give two examples of considerations that might enter the decision whether to block a merger other than current market concentration. Briefly explain these.

Solutions

Expert Solution

a) The Mergers in USA is approved by Anti Trust division of department of justice in conjugation with federal trade commission.

b) Market definition is important for mergers, as it-

It helps frame analysis of competitive interaction.
It gauges the firm power over price input and output.
it helps to measure the market concentration.

c) It would be in the best interest of both companies to have a narrow market ranges with few firms as possible. The ratio of the shares that had to be allocated is well defined in case of an narrow market ranges. It becomes easier to prepare annual accounting statements, balance sheets, etc. Also, the employees are not laid off, jobs are retained with cohesive work environment.

d) Market concentration is used when smaller firms account for large percentage of the total market. It measures the extent of domination of sales by one or more firms in a particular market. The market concentration ratio is measured by the concentration ratio.The market concentration ratio measures the combined market share of all the top firms in the industry.

e) An Merger could be blocked off due to any of the following circumstances-

High prices due to monopoly.
Lack of organisational tuning.
Diseconomies of scale.
Excessive job losses of both the companies.

jeff jeffy answered 1 year ago

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