The International Handbook of Competition
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The International Handbook of Competition

  • Elgar original reference

Edited by Manfred Neumann and Jürgen Weigand

This indispensable Handbook examines both economic and legal aspects of competition policy and industrial organization. It provides a scholarly review of the state of the art regarding economic theory, empirical evidence and standards of legal evaluation. The book aims primarily at furthering our understanding of the interplay between economic reasoning and legal expertise by concentrating on the fundamental issues and principles underlying competition policy.
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Chapter 2: Efficiency versus Market Power through Mergers

Dennis C. Mueller

Extract

2 Efficiency versus market power through mergers Dennis C. Mueller 1 Introduction The 20th century began with the first great merger wave in the United States and the United Kingdom. It ended with another great wave that engulfed virtually every developed country in the world. As befits a global economy, many of the mergers taking place at the end of the century were cross-border deals. In between these two great waves there were three additional waves in the United States at the end of the 1920s, 1960s and 1980s. These mergers have obviously transformed the companies involved in them. In 1950, Philip Morris was a relatively non-leading, specialized company in the tobacco industry. Later it became the largest cigarette producer in the world, thanks to its introduction of the Marlboro brand in the mid-1950s, and the world’s leading retail food manufacturer, thanks to its many acquisitions over the years, including in particular its acquisitions of food company giants Kraft Foods and General Foods. Other than changing the shapes and sizes of the merging companies, what have been the effects of the many thousands of mergers that have occurred in the United States and increasingly in all corners of the globe and, in particular, what have been their effects on efficiency and market power? This would seem to be the most obvious and important question to ask about mergers both with respect to our understanding of the merger process and for the design of merger policy. Unfortunately, after...

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