What are the effects of horizontal mergers on competition?

Horizontal mergers are business mergers between two or more competitors in the same market that are at the same level of the supply chain. This type of merger can be beneficial in the long run as it can give the newly-merged company the resources to achieve greater economies of scale and reduce costs. In the short run, however, such mergers can have severe consequences for competition in a market. Firstly, the newly-formed company will have significantly increased market power as a result of the merger, creating a monopoly over the industry which can allow the company to set prices to its own advantage. Such a monopoly can also lead to reduced consumer choice and quality, as well as decreased innovation as the newly-formed company no longer has the motivation to create new products. Secondly, such mergers can also reduce the incentive for companies to enter the market in pursuit of profits as they are effectively blocked from competing with the larger company. This can effectively create a barrier to entry for new companies in the market and reduce the long-term competitive nature of the market. In Delaware, antitrust laws, such as the Sherman and Clayton Antitrust Acts, are designed to protect competition in markets by prohibiting activities and mergers which substantially lessen competition, such as horizontal mergers. In short, horizontal mergers can have substantial effects on competition in a particular market, and antitrust laws in Delaware are in place to ensure that these effects are minimized.

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What are the effects of horizontal mergers on competition?

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