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Academic Articles Awards > Economics

Mergers after cartels: How markets react to cartel breakdown

S. W. Davies, Peter L. Ormosi and Martin Graffenberger, The Journal of Law and Economics, November 2015

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Readers’ vote will close on February 15, 2016. Readers’ vote will allow you to nominate 1 article for each of the Awards, i.e., 10 Academic articles, 10 Business articles, and the best Soft Laws. The readers’ short-list of Academic and Business Articles will be communicated to the Board together with the 20 articles nominated by the Steering Committees. The Board will decide on the award-winning articles. Results will be announced at the Awards ceremony to take place in Washington DC on the eve of the ABA Antitrust Spring Meeting on April 5, 2016.

This paper examines whether cartel breakdown provokes a period of intensive merger activity amongst the former cartelists, designed to re-establish tacit collusion. Using a novel application of recurrent event survival analysis for a pooled sample of 84 European cartels, it …finds that mergers are indeed more frequent post-cartel breakdown, especially in markets which are less concentrated. However, it cautions against merely assuming that these mergers are motivated by coordinated effects - alternatively, they may be the consequence of market restructuring, necessitated by more intense competition post-cartel. Further disaggregated analysis of the individual mergers show that on average these mergers are profi…table for the acquiring company, and that the tacit collusion motive is likely to be at work for a large minority of the mergers.

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