Antitrust authorities devote significant resources to reviewing proposed business mergers for possible anticompetitive effects such as higher consumer prices. But there has been little evaluation of whether mergers that have been implemented result in higher consumer prices. Absent this information, it is impossible to determine whether antitrust policies are either too stringent or too restrained.

A recent study selected from approved mergers those that, prior to approval, had appeared the most likely to result in price increases. The study then evaluated a sample of five of those mergers some time after they had been completed. The merged firms had produced brand-name products that were virtually interchangeable in the market segment they targeted. To take into account any changes that happened to coincide with the merger (and could therefore be confounding factors in the analysis), the study used the corresponding generic products within the industry as a control group. Generics were regarded as suitable because they shared many of the same inputs—though not advertising—with the brand-name products of the merged companies, but would not have been treated by committed purchasers of brand-name products as equally good substitutes for those products. Thus prices for generics would probably remain relatively unaffected by price increases resulting from the merger.

The study found that four of the five mergers in the sample resulted in some increases in consumer prices. The estimated price increases were relatively small, typically between 3 and 7 percent. However, given that the mergers were in industries that conduct a large amount of commerce, the implied total cash transfer from consumers to manufacturers is substantial. 

Because the study has some limitations, it would be premature to conclude that the mergers, from which the sample studied was selected, were on balance, harmful to consumers. The study examined only the consequences of failures to block mergers that might usefully have been blocked. It did not analyze the consequences of rejecting mergers that would not have resulted in higher prices. This raises the possibility that in allowing mergers that turn out to be anticompetitive—as evidenced by resulting price increases, for example—governments may also allow many mergers that turn out to be efficient but would have been challenged under a stricter antitrust policy.