Antitrust authorities at the Federal Trade Commission are reviewing your company’s recent merger with a rival firm. The FTC is concerned that the merger of two rival firms in the same market will increase market power. A hearing is scheduled for your company to present arguments that your firm has not increased its market power through this merger. Can you do this? How? What evidence might you bring to the hearing?
To present arguments that your firm has not increased its market power through the merger, you will need to provide evidence to support your claim. Here's how you can go about it:
1. Analyze Market Share: Gather data on market shares pre-merger and post-merger. If your firm's market share has not significantly increased or if it remains below a certain threshold, it can be an important piece of evidence to demonstrate that the merger has not resulted in increased market power.
2. Assess Market Competition: Evaluate the level of competition in the market before and after the merger. If the merger has not resulted in a decrease in the number of competitors or if new competitors have entered the market, it can support your argument that the merger hasn't led to increased market power.
3. Conduct Market Concentration Analysis: Calculate market concentration measures such as the Herfindahl-Hirschman Index (HHI) to determine the impact of the merger on market concentration. If the resulting HHI value doesn't exceed certain thresholds or if there is no significant change in concentration, it can provide evidence against increased market power.
4. Consider Barriers to Entry: Evaluate any barriers to entry in your industry. If the merger has not created new barriers that limit firms from entering the market or expanding their operations, it can indicate that market power hasn't been increased significantly.
5. Assess Pricing Behavior: Analyze pricing behavior to determine whether prices have significantly increased post-merger. If prices remain competitive or have not increased disproportionately, it can be evidence that market power has not been enhanced.
6. Gather Independent Expert Opinions: Engage economic experts who can provide objective analysis and testimony regarding the potential impact on market power. Independent expert opinions can add credibility to your arguments and strengthen your case.
It's important to note that in antitrust cases, the evidentiary requirements can vary, and it is advisable to consult with legal counsel to ensure you gather the most appropriate evidence and arguments specific to your situation.