The Antitrust Division of the Department of Justice carefully scrutinizes mergers. Why?

Answer 1

Mergers can lead to an increase in market power, which can lead to the abuses of that power discussed in the text. In a market in which concentration is high and/or entry is difficult (the market is not contestable), a merger can have adverse consequences for buyers of the good or service. Under these conditions, the Department of Justice will often oppose a merger. Guidelines that indicate whether the Department of Justice is (or is not) likely to seek to block a merger were loosened in announcements in 1982, 1984, and 1991, compared to original guidelines dating from 1968 . Although mergers can have public benefits (such as permitting economies of scale or scope, or "synergism" when two firms bring special skills or resources together, or permit a reduction in risk), critics have pointed out that not all mergers actually have the expected benefits. To the extent that a merger may affect economic well-being, government should pay attention to merger activity.