Anticompetitive Mergers in Labor Markets

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Mergers of competitors are conventionally challenged under the federal antitrust laws when they threaten to lessen competition in some product or service market in which the merging firms sell. In many of these cases the threat is that in concentrated markets—those with only a few sellers—the merger increases the likelihood of collusion or collusion-like behavior. The result will be that the post-merger firm will reduce the volume of sales in the affected market and prices will rise. Mergers can also injure competition in markets in which the firms purchase, however. Although that principle is widely recognized, very few litigated cases have applied the merger law to buyers. The fear is that firms who collectively have power in the market in which they buy will be able to suppress the price that they pay. Such exercises of “monopsony” power are mirror images of the monopoly power exercised in selling markets. The post-merger firm reduces the number of purchases and forces the market price down.