The main challenge for antitrust regulators is to determine when a merger may hinder competition.
What is antitrust?
- Antitrust laws are rules that promote competition by restricting a firm's ability to dominate the market.
- A merger between rivals has the potential to hurt customers in one of two ways: By allowing the merged company to raise prices profitably on its own or by (1) enabling or improving the ability of the remaining firms to act in a coordinated manner on some competitive dimension (coordinated interaction).
- A merger increases market share and lessens competition. As a result, the new business can establish a monopoly and raise the prices of the goods and services it offers.
- When two businesses merge, the stock of each is ceded, and fresh equity shares are issued for the new company. A merger or acquisition occurs when one business buys another.
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