Should competition authorities care about conglomerate mergers?
Carolina Policarpo Garcia and Paulo Furquim de Azevedo
Carolina Policarpo Garcia: Sao Paulo School of Economics - FGV and University College London. E-mail: firstname.lastname@example.org; Paulo Furquim de Azevedo:Insper Institute. E-mail: email@example.com
Please cite the paper as:
Carolina Policarpo Garcia and Paulo Furquim de Azevedo, (2017), Should competition authorities care about conglomerate mergers?, World Economics Association (WEA) Conferences, No. 1 2017, Public Law and Economics, 1st June to 30th June, 2017
Mergers and acquisitions may change competition even when they do not affect market structure, a case known as conglomerate mergers. Competition authorities for a long time have adopted an ambiguous view towards conglomerate mergers, in particular those that are product or market extension mergers (i.e. acquisitions of local firm by a multiunit company that sells the same product in different geographic markets). In this paper, we explore a wave of acquisitions of Higher Education Institutions by educational groups in Brazil, which allow us to disentangle the effects of conglomerate mergers and of horizontal mergers on price, quantity and quality. Our findings show that multiunit organizations are able to increase some quality indicators. As for the effect on price and quantity, results are different. For conglomerate mergers we estimated an increase in the number of freshmen and tuition fees, whereas for acquisitions that leads to horizontal concentration there is no increase in quantity, just in prices. On the whole, our findings are consistent with the hypothesis that multiunit operations increase efficiency, due to scale and scope economies, but that only conglomerate mergers tend to pass on those gains to consumers. We find, though, heterogeneous effects according to the educational group, which still give some leeway for competition authorities to care about conglomerate mergers.