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By the end of this section, you will be able to:

  • Explain antitrust law and its significance
  • Calculate concentration ratios
  • Calculate the Herfindahl-Herschman Index (HHI)
  • Evaluate methods of antitrust regulation

A corporate merger    occurs when two formerly separate firms combine to become a single firm. When one firm purchases another, it is called an acquisition    . An acquisition may not look just like a merger, since the newly purchased firm may continue to be operated under its former company name. Mergers can also be lateral, where two firms of similar sizes combine to become one. However, both mergers and acquisitions lead to two formerly separate firms being under common ownership, and so they are commonly grouped together.

Regulations for approving mergers

Since a merger combines two firms into one, it can reduce the extent of competition between firms. Therefore, when two U.S. firms announce a merger or acquisition where at least one of the firms is above a minimum size of sales (a threshold that moves up gradually over time, and was at $70.9 million in 2013), or certain other conditions are met, they are required under law to notify the U.S. Federal Trade Commission (FTC). The left-hand panel of [link] (a) shows the number of mergers submitted for review to the FTC each year from 1999 to 2012. Mergers were very high in the late 1990s, diminished in the early 2000s, and then rebounded somewhat in a cyclical fashion. The right-hand panel of [link] (b) shows the distribution of those mergers submitted for review in 2012 as measured by the size of the transaction. It is important to remember that this total leaves out many small mergers under $50 million, which only need to be reported in certain limited circumstances. About a quarter of all reported merger and acquisition transactions in 2012 exceeded $500 million, while about 11 percent exceeded $1 billion. In 2014, the FTC took action against mergers likely to stifle competition in markets worth 18.6 billion in sales.

Number and size of mergers

The graph on the left shows that the number of mergers have dropped substantially since 2000. The graph on the right shows that the majority of mergers in 2012 were between $100 million and $150 million.
(a) The number of mergers in 1999 and 2000 were relatively high compared to the annual numbers seen from 2001–2012. While 2001 and 2007 saw a high number of mergers, these were still only about half the number of mergers in 1999 and 2000. (b) In 2012, the greatest number of mergers submitted for review was for transactions between $100 and $150 million.

The laws that give government the power to block certain mergers, and even in some cases to break up large firms into smaller ones, are called antitrust laws    . Before a large merger happens, the antitrust regulators at the FTC and the U.S. Department of Justice can allow the merger, prohibit it, or allow it if certain conditions are met. One common condition is that the merger will be allowed if the firm agrees to sell off certain parts. For example, in 2006, Johnson&Johnson bought the Pfizer’s “consumer health” division, which included well-known brands like Listerine mouthwash and Sudafed cold medicine. As a condition of allowing the merger, Johnson&Johnson was required to sell off six brands to other firms, including Zantac® heartburn relief medication, Cortizone anti-itch cream, and Balmex diaper rash medication, to preserve a greater degree of competition in these markets.

Questions & Answers

the diagram of the digestive system
Assiatu Reply
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Ogenrwot
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William Reply
They formed in two ways first when one sperm and one egg are splited by mitosis or two sperm and two eggs join together
Oluwatobi
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Josephine Reply
Genetics is the study of heredity
Misack
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Misack
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the study of living organisms and their interactions with one another and their environments
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the study of living organisms and their interactions with one another and their environment.
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list any five characteristics of the blood cells
Shaker
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advantage of electronic microscope is easily and clearly while disadvantage is dangerous because its electronic. advantage of light microscope is savely and naturally by sun while disadvantage is not easily,means its not sharp and not clear
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Abdullahi
is like gone fail us
DENG
cells is the basic structure and functions of all living things
Ramadan
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ISCONT Reply
is organisms that are similar into groups called tara
Yamosa
in what situation (s) would be the use of a scanning electron microscope be ideal and why?
Kenna Reply
A scanning electron microscope (SEM) is ideal for situations requiring high-resolution imaging of surfaces. It is commonly used in materials science, biology, and geology to examine the topography and composition of samples at a nanoscale level. SEM is particularly useful for studying fine details,
Hilary
cell is the building block of life.
Condoleezza Reply
what is cell divisoin?
Aron Reply
Diversity of living thing
ISCONT
what is cell division
Aron Reply
Cell division is the process by which a single cell divides into two or more daughter cells. It is a fundamental process in all living organisms and is essential for growth, development, and reproduction. Cell division can occur through either mitosis or meiosis.
AI-Robot
What is life?
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life is defined as any system capable of performing functions such as eating, metabolizing,excreting,breathing,moving,Growing,reproducing,and responding to external stimuli.
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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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