Dick draws attention to a paradox: mergers provoke the competitors of
the merging firms to complain. Why do they act this way?
Mergers and acquisitions enhance market concentration. According to
conventional wisdom, the more concentrated the industry, the higher the
prices every producer or supplier can charge. Why would anyone complain
about being able to raise prices in a post-merger market?
Apparently, conventional wisdom is wrong. Market concentration leads to
price wars, to the great benefit of the consumer. This is why firms
find the mergers and acquisitions of their competitors worrisome.
America's soft drink market is ruled by two firms - Pepsi and
Coca-Cola. Yet, it has been the scene of ferocious price competition
for decades.
"The Economist", in its review of the paper, summed it up neatly:
"The story of America's export cartels suggests that when firms decide
to co-operate, rather than compete, they do not always have price
increases in mind. Sometimes, they get together simply in order to cut
costs, which can be of benefit to consumers."
The very atom of antitrust thinking - the firm - has changed in the
last two decades. No longer hierarchical and rigid, business resembles
self-assembling, nimble, ad-hoc networks of entrepreneurship
superimposed on ever-shifting product groups and profit and loss
centers.
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