Mergers after cartels: How markets react to cartel breakdown

Stephen Davies, Peter Ormosi and Martin Graffenberger
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Stephen Davies: Centre for Competition Policy and School of Economics, University of East Anglia
Peter Ormosi: Centre for Competition Policy and Norwich Business School, University of East Anglia
Martin Graffenberger: Centre for Competition Policy, University of East Anglia

No 2014-01, Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) from Centre for Competition Policy, University of East Anglia, Norwich, UK.

Abstract: Using a novel application of recurrent event survival analysis for a sample of 84 EC industries, this paper establishes that cartel breakdown is typically followed by intensive merger activity - especially for cartels detected only after they had already broken down, and where concentration was lower. In a number of cases mergers led to the emergence of dominant leading firms while in most markets where mergers did not occur, post-cartel structure was already consistent with dominance. These results are consistent with the hypothesis that mergers are often designed to establish a new market structure conducive to tacit collusion. Surprisingly few mergers were intervened by the competition authority, apparently because many were individually small, but cumulatively had significant impact on concentration.

Keywords: tacit and overt collusion; mergers; long-terme¤ects; recurrent events; survival analysis (search for similar items in EconPapers)
JEL-codes: C41 L10 L41 (search for similar items in EconPapers)
Date: 2014-03-20
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:uea:ueaccp:2014_01

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