A Study Of The Competition Effect Led By Horizontal Mergers

In one hand, horizontal mergers and acquisitions will increase companies’ market power, then the companies’ behaviors of the raising prices and reducing output become more profitable, and that is what we called anti-competitive effect; in the other hand, because of scale economy and synergistic effect horizontal mergers and acquisitions will lead to efficiency gains which can reduce some even all the anti-competitive effect. Hence this thesis takes the anti-competitive effect and the efficiency gains caused by the horizontal mergers and acquisitions into consideration with a strong theoretical significance. Mergers and acquisitions between the industries can improve the industrial structures and reduce the resources waste caused by excessive competition. Because of the significant underestimation of the market value of many enterprises mergers and acquisitions are equivalent to the long-term investments; therefore the enterprises show strong willingness to mergers and acquisitions. Therefore the study of the effect of mergers and acquisitions has strong practical significance.This thesis elaborates the competition effect led by horizontal mergers and acquisitions from three angles of horizontal mergers and acquisitions and market concentration, horizontal mergers and acquisitions and efficiency gains as well as horizontal mergers and acquisitions and industrial competition. Horizontal mergers and acquisitions can improve the market concentration while horizontal mergers and acquisitions show significant anti-competitive characters in the industry with high market concentration. Enterprises can improve scales quickly and achieve economies of scale by mergers and acquisitions of other enterprises in the industry and can achieve synergistic effect of management and finance with the basement of good integration. However the relationship between the horizontal mergers and acquisitions and the industrial competitions is complex. If the two parts of the mergers and acquisitions have low market shares and mergers and acquisitions can show efficiency gains, horizontal mergers and acquisitions may improve the industrial competition. However if the mergers and acquisitions happen between big enterprises, it is hard to say that enterprises will not abuse the market power to restrict competition with the improvement of the market power.This thesis introduces merger simulation technology which is a common tool of antitrust review. Merger simulation is to analyze the present situation of the economy by using the available data or observing data, and predict the economic consequences of economic decisions or behavior so that we can provide the basis for making the policies. One of the key problems of the merger simulation technology is the selection of the model, and choosing an appropriate model depends on two aspects: one is the limitation of the data and the other one is whether the model can reflect the features of the consumers in the industry.This thesis introduces the case of the merger of the Eastern Airlines and Shanghai Airlines, and analyzes the coordinated effect of the merger by Massimo Motta’ Conspiracy effect analysis. It turns out that there is no coordinated effect in the merger. And then this thesis analyzes unilateral effect of the merger by using the merger simulation technology and we find out unilateral effect of the merger is smaller than 5% which means no obvious unilateral effect. Based on analyzing the unilateral effects of the merger the thesis calculates the minimum compensation efficiency which can offset the unilateral effect. In addition, the thesis shows the efficiency gains that the merger may lead from three aspects of effect of scale economy, synergistic effect and effect of the special industry, and it turns out that the merger has obvious efficiency effect.In the last part of this thesis for the conclusion of this paper proposes the following policy recommendations: normative work antitrust enforcement authorities should antitrust control, attention to the efficiency of anti-competitive effect of diminishing the role of, and strengthen supervision of mergers; M & A business parties should strengthen the integration of acquisitions of resources, rational allocation, to fully realize the efficiency gains from acquisitions; lack of competitiveness of China’s civil aviation industry, should pay attention to the use of M&A means of enhancing the international competitiveness of Chinese civil aviation.