BPUB621.2003.Lecture.Slides.7.Antitrust.Mergers

BPUB621.2003.Lecture.Slides.7.Antitrust.Mergers - [7](1):...

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Wharton School: [7](1): Clayton Act (1914) Section 7: Mergers are illegal if they “substantially lessen competition” or “tend to create a monopoly” Mergers which violate Section 7 are NOT a criminal offense Joint enforcement jurisdiction for both Antitrust Division of the Justice Department (JD) and Federal Trade Commission (FTC) Civil remedies: injunction preventing the merger Section 4: Private lawsuits to block mergers State Attorneys General can sue on behalf of their consumers obtain an injunction to block the merger obtain treble damages from higher prices Consumers can sue for treble damages from higher prices Competitors can sue to treble damages or to block the merger
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Wharton School: [7](2): Premerger Notification Hart-Scott-Rodino (1976) premerger notification Proposed merger must be filed with JD and FTC 30 day waiting period before consummation of the merger Agencies can make a “second request” for more information After compliance with second request, an additional 30 day waiting period Agencies create a team of lawyers and economists investigate competition Lawyers and economists for the corporations can meet with the agencies Consent Decree or Litigation If JD or FTC decides no competitive problem, then merger proceeds If JD or FTC decides that there is a competitive problem, then negotiations for a consent decree with divestitures or competitive conditions If NO agreement on a consent decree, then JD or FTC files suit for a preliminary injunction to block the merger, and court holds a hearing on the merits
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Wharton School: [7](3): Merger Guidelines - Market Power (1) Define product and geographic markets (2) Identify competitors in the market Current suppliers, uncommitted entrants, product substitution Including foreign suppliers who export into the market (3) Measure concentration and market power Calculate the market shares of the firms in the industry – Industry Concentration using the post-merger HHI: HHI = h s i 2 Highly Concentrated Industries: HHI > 1800 Example: five firms each with 20% share results in an HHI = 2000 (4) Potential Adverse Competitive Effects Coordinated Interaction: collusion is easier with fewer competitors Unilateral Effects: price increases from less competition among firms
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Wharton School: [7](4): Relevant Product Markets Economic Factors Consumer choices among the products of the different suppliers Supplier decisions about competition with the products of other suppliers Similarity of product characteristics of different products
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This note was uploaded on 07/27/2009 for the course ECON BPU taught by Professor Perry during the Spring '09 term at Rutgers.

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BPUB621.2003.Lecture.Slides.7.Antitrust.Mergers - [7](1):...

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