While the Department of Justice and FTC have allowed some mergers and prohibited others, the industry's average price has tended to fall whenever a merger has been permitted. Is it correct then to infer that the authorities should have been more lenient and permitted more mergers?
The industry's average price has fallen whenever a merger has been permitted due to the size of the newly formed company, and what they're able to do. Although this isn't the only reason, it's one of the primary reasons. When a merger takes place, and particularly when we're dealing with two very large companies, the merged company is able to produce more while not incurring substantial additional expense in their production of goods or services because they're also relying on the same resources that the first company used. Each company still has the same resources available which they continue to use in the merger. The larger, merged company can now do more with more and charge less for doing so.
I wouldn't say that they should have permitted more mergers. The DOJ and FTC evaluates each merger possibility based on several factors, and I think it's a relatively effective system. The main issue that they look at is to determine if the companies ...
This solution discusses if authorities should have been more lenient and permitted more mergers, when discussing horizontal mergers.