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Should competition authorities care about conglomerate mergers?

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  • Policarpo Garcia, Carolina
  • Furquim de Azevedo, Paulo
Abstract
Mergers and acquisitions may change competition even when they do not affect market structure, a case known as conglomerate mergers. In this paper, we explore a wave of acquisitions of higher education institutions by educational groups in Brazil, which allows us to disentangle the effects of conglomerate mergers and of horizontal mergers on price, quantity, and quality indicators. Our findings show that multiunit organizations are able to increase some quality indicators. As for the effect on price and quantity, results are different. For conglomerate mergers, we estimated an increase in the number of freshmen and tuition fees, whereas for acquisitions that lead to horizontal concentration there is no increase in quantity, just in prices. Also these effects are larger the smaller the market share of the acquired HEI. On the whole, our findings are consistent with the hypothesis that multiunit operations increase efficiency, but only conglomerate mergers tend to pass those gains on to consumers. Results also indicate that greater caution should be taken in market extension mergers when the acquired firm has a clear dominant position.

Suggested Citation

  • Policarpo Garcia, Carolina & Furquim de Azevedo, Paulo, 2019. "Should competition authorities care about conglomerate mergers?," International Journal of Industrial Organization, Elsevier, vol. 66(C), pages 78-118.
    • Handle: RePEc:eee:indorg:v:66:y:2019:i:c:p:78-118
    DOI: 10.1016/j.ijindorg.2019.06.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Mergers and acquisitions; Conglomerate mergers; Multiunit firms; Higher education;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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