Vertical Mergers

The antitrust economics of vertical mergers, and hence the enforcement policy toward them, are substantially more complicated than they are for horizontal mergers. Vertical mergers are presumed, on both theoretical and empirical grounds, to be efficiency enhancing, but that does not mean they are always welfare enhancing or in the interests of downstream consumers. They may result in foreclosure (input or costumer) involves an evaluation of (i) the integrating firm’s ability to foreclose, (ii) the integrating firm’s incentives to foreclose, and (iii) the effect of foreclosure of the downstream market. Ex post enforcement, using monopolization or abuse of dominance provisions is not always an effective substitute for ex ante vertical merger enforcement. A coordinated effect arises from a vertical merger if post-merger firms are able to coordinate more effectively, either because it makes reaching a tacit agreement on the coordinated outcome easier or makes enforcement more effective.