Social Sciences in China (Chinese Edition)

No.8, 2019

On the Anticompetitive Effects of Vertical Mergers

(Abstract)

Ye Guangliang and Cheng Long

Mergers and acquisitions not only impact the internal productive efficiencies of enterprises but alter their collaborative motives. Researchers have built a model to analyze the relationship between mergers of upstream and downstream enterprises and the stability of industrial collaboration, so as to discuss the influence of such factors as merger control, longitudinal cross-holdings, and cost asymmetry. As it has been found, a merger through holdings by an upstream company shows a more stable collaboration, while that by a downstream one displays less stability. Likewise, a downstream enterprise may reduce the stability of its collaboration when it increases the proportion of its cross-holdings in upstream companies. When the cost of a downstream enterprise is asymmetric, the upstream enterprise prefers the merger and acquisition of a high-cost downstream enterprise, using non-holding methods to ensure no betrayal of collaboration so as to increase the stability. When an organ engaging in anti-monopoly law enforcement conducts a review of mergers of operators, it needs to conduct a stronger analysis of the coordination effect of vertical mergers and acquisitions and to conduct a more careful analysis of the anticompetitive effects of how certain mergers and acquisitions affect the collaboration of enterprises.