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Coordinated Effects in Merger Review

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  • Simon Loertscher
  • Leslie M. Marx

Abstract

Coordinated effects are merger-related harms that arise because a subset of postmerger firms modify their conduct to limit competition among themselves, particularly in ways other than explicit collusion. We provide a measure of the risk of such conduct by examining the individual rationality of participation by subsets of firms in market allocation schemes. This measure of risk for coordinated effects distinguishes markets that are at risk from those that are not and distinguishes mergers that increase risk from those that do not. A market’s risk for market allocation by a subset of firms varies with the degree of outside competition, symmetry and strength of the subset of firms, buyers’ power, and vertical integration. We make precise the widely used but rarely rigorously defined notion of a maverick firm and provide foundations for a maverick-based approach to coordinated effects. In addition, we identify previously unrecognized trade-offs between unilateral and coordinated effects.

Suggested Citation

  • Simon Loertscher & Leslie M. Marx, 2021. "Coordinated Effects in Merger Review," Journal of Law and Economics, University of Chicago Press, vol. 64(4), pages 705-744.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/714919
    DOI: 10.1086/714919
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    8. Lagos, Vicente, 2017. "Assessment of post-merger coordinated effects: Characterization by simulationsAuthor-Name: Ivaldi, Marc," International Journal of Industrial Organization, Elsevier, vol. 53(C), pages 267-305.
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    Cited by:

    1. Schmitz, Patrick W., 2023. "The proper scope of government reconsidered: Asymmetric information and incentive contracts," European Economic Review, Elsevier, vol. 157(C).

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