Mergers : Coordinated Effects

Mergers between competitors (i.e. horizontal mergers) come with two key theories of harm: unilateral effects and coordinated effects. In this paper, we review the appropriate economic framework for assessing coordinated effects in the context of a merger review. We focus on the three necessary conditions for a coordinated effect to arise post-merger: (i) firms are able to align on a particular coordinated outcome (coordination condition); (ii) firms are able to take away any incentive for other firms participating in the coordinated outcome to behave more competitively (internal stability conditions); (iii) the coordinated outcome is not disrupted by outside actors such as current or potential competitors, customers, or government (external stability conditions). We subsequently discuss the relevance of considering the merger-specificity of coordinated effects and the need for clear policy guidance on this