The impact of retail mergers on food prices: evidence from France

Using consumer panel data, we analyze the impact of a merger in the retail sector on food prices in France. In order to capture the local dimension of retail competition, we define local markets as catchment areas around each store. We develop a difference-in-differences analysis to compare price changes in local markets where the merger did modify the ownership structure (treated group) to price changes in local markets where the merger did not affect the ownership structure (control group). We find that prices of competing firms in areas where the merger occurred (treated group) increased significantly relative to the control areas where existing firms were not affected by a merger. In fact, our findings suggest that the merger significantly raised the competitors' prices. These results are consistent with a combination of local concentration and a decrease in differentiation.