\"Entering a Merger and Organizational Form\" Please respond to the following: •
ID: 1213485 • Letter: #
Question
"Entering a Merger and Organizational Form" Please respond to the following: •From the scenario for Katrina’s Candies, examine the major implications for firms entering into a merger. Explain the criteria the U.S. Department of Justice and the Federal Trade Commission would follow when deciding on whether or not to approve a proposed merger. See latest news video on the proposed merger between Honeywell and UTX below. Click on image above or this link http://video.cnbc.com/gallery/?video=3000495858
Explanation / Answer
Merger of firms reduces uncertinity arising out of different market forms.THe merger of firms aims at joint determination of output and profits.If merger is possible the firms would do better to chose the output that maximises the total industry profits and then divide up the profits among themselves.when firm 1 considers expanding its output, it will contemplate the usual two effects ,the extra profits from selling more output and reduction in profits from forcing the price down. But in the second effect it now takes into account the effect of lower price on both its own output and output of other firms.This is becuse it is now intrested in maximisig total industry profits not just its own profits.
B
Clarify that merger analysis does not use a single methodology, but is a fact-specific process through which the agencies use a variety of tools to analyze the evidence to determine whether a merger may substantially lessen competition.
Introduce a new section on “Evidence of Adverse Competitive Effects.” This section discusses several categories and sources of evidence that the agencies, in their experience, have found informative in predicting the likely competitive effects of mergers.
Explain that market definition is not an end itself or a necessary starting point of merger analysis, and market concentration is a tool that is useful to the extent it illuminates the merger’s likely competitive effects.
Provide an updated explanation of the hypothetical monopolist test used to define relevant antitrust markets and how the agencies implement that test in practice.
Update the concentration thresholds that determine whether a transaction warrants further scrutiny by the agencies.
Provide an expanded discussion of how the agencies evaluate unilateral competitive effects, including effects on innovation.
Provide an updated section on coordinated effects. The guidelines clarify that coordinated effects, like unilateral effects, include conduct not otherwise condemned by the antitrust laws.
Provide a simplified discussion of how the agencies evaluate whether entry into the relevant market is so easy that a merger is not likely to enhance market power.
Add new sections on powerful buyers, mergers between competing buyers, and partial acquisitions.
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