3.6 - Government Intervention: Mergers

Question 1

What are the 5 main controls by government intervention?

Answer 1

Price
Profit
Quality
Efficiency
Choice

Question 2

What are the potential benefits of mergers?

Answer 2

Economies of scale + scope
R+D investment
Dynamic efficiencies
Improved competitiveness

Question 3

What are the potential drawbacks of mergers?

Answer 3

Monopoly + monopsony power
Sluggish + inefficient
Less real competition
Rising entry barriers

Question 4

How can mergers increase entry barriers within an industry?

Answer 4

Predatory pricing
Cross subsidisation

Question 5

How can mergers increase monopsony power?

Answer 5

Larger firm
Able to drive down wages + suppliers prices

Question 6

What are the general evaluation points regarding mergers?

Answer 6

Scope for EoS
Contestability
P,P,E,C,Q
Employment

Question 7

What does competition policy generally aim to ensure?

Answer 7

Technological innovation
Effective price competition
Promotion of consumer interest

Question 8

When does the CMA have authority to investigate a merger?

Answer 8

25% market share

Question 9

Give 2 examples of merger interventions

Answer 9

2018 - Sainsbury’s + Asda investigated
2001 - Lloyds + Abbey National blocked