Nonprice Effects of Mergers

• Author: John Kwoka,Shawn Kilpatrick
• Date: 01 June 2018
• DOI: 10.1177/0003603X18771756
• Published date: 01 June 2018

Article

Nonprice Effects of Mergers:

Issues and Evidence

John Kwoka* and Shawn Kilpatrick**

Abstract

Antitrust analysis of mergers focuses heavily—some would say, almost exclusively—on price effects.

That focus does not reflect the lesser importance of quality, variety, cost, and technological pro-

gressiveness in mergers, but rather reflects better analytical tools and predictions for price effects.

This article first provides an overview of the distinctive, often problematic, issues raised in evaluating

nonprice effects. It then surveys the available empirical evidence on these from merger retrospectives.

The evidence suggests that mergers on average may not cause either significant improvements or

significant harms in terms of nonprice outcomes. While that might seem to suggest that policy need

not be unduly concerned with nonprice effects, sufficient data do not exist for statistical testing.

Moreover, variation in the average effects appears large, so that in particular cases nonprice concerns

may dominate.

Keywords

mergers, nonprice effects, merger retrospectives, antitrust policy

I. Introduction

To many observers and practitioners, merger analysis seems to have a singular focus on price effects,

with scant attention to such nonprice outcomes as the quality of the good or service, technological

change, or other product features. Indeed, the 1992 Merger Guidelines issued jointly by the Antitrust

Division of the Justice Department and the Federal Trade Commission acknowledged nonprice effects

in a single sentence buried in a footnote. That sentence reads thus: “Sellers with market power also

may lessen competition on dimensions other than price, such as product quality, service, or

innovation.” There was literally no further discussion of such effects—no details of what these effects

might consist of, or how concentration and mergers might affect them, or how they were to be weighed

against price effects, or what kind of remedial action might be appropriate.

The 2010 Merger Guidelines—the first major revision since 1992—sought to correct this imbalance

at least in part by stating that “market power can also be manifested in non-price terms and conditions”

and declaring that in evaluating nonprice effects the agencies “employ an approach analogous to that

*Finnegan Distinguished Professor of Economics, Northeastern University, Boston, MA, USA

**Northeastern University, Boston, MA, USA

Corresponding Author:

John Kwoka, Department of Economics, Northeastern University, Boston, MA 02115, USA.

Email: j.kwoka@northeastern.edu

The Antitrust Bulletin

2018, Vol. 63(2) 169-182

ªThe Author(s) 2018

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DOI: 10.1177/0003603X18771756

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