Monopolies and Mergers

Paper Summary:

This paper explains that a monopoly is a situation within a given market where there is a single supplier of a good or service; a merger is the union of two or more corporations or commercial interests. The author points out that a major ethical concern about both monopolies and mergers is the forced manner in which they conduct business with suppliers. In both cases, the firms have enough buying power to force producers to sell components or goods at a lower margin, as in the case of Wal-Mart. The paper relates that the anticompetitive atmosphere in both monopolies and mergers can lead to a stagnant market because there is little marketplace incentive for innovation and advancement.

From the Paper:

"Again, how drastically competition is affected by a merger is dependant on the type of merger. In a horizontal merger, the acquisition of competitors often leaves the market concentration far higher for the merged company, and may even completely eliminate competition in the area of the merger. In a vertical merger, competition can be drastically affected by the merged company's ability to reduce or even eliminate the competitor's access to an important component or channel of distribution for the product. This "vertical foreclosure" can cause competitors to be unable to continue their business. Finally, the potential-competition merger is perhaps the most dangerous for competition. In this merger, not only is the large firm eliminating their smaller competitors, but they are also contributing to the idea that any future potential competitor will also be forced to merge. The merged company thwarts competition through the threat of a forced merger."

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