Question

The Justice Department refused to approve a merger between office supplier Staples and office supplier Office Depot, a merger that would have given the two 70% of the office supply store market. Which of the following would be a valid reason for denying the approval for the merger?​

a. ​a market share of 50% from the combined companies
b. ​that no new office suppliers would be able to enter the market
c. ​that vertical mergers are per se violations
d. ​both b and c

Answer 1

The correct answer is A) A market share of over 50% from the combined companies

Step-by-step explanation:

The Clayton Act of 1914 regulates acquisitions and mergers in the United States. This is the legal source that the Justice Deparment would use to approve or disapprove the merger described in the question. It explicitly forbids mergers that result in over 50% of market share, because it consideres a higher percentage than that (a market share from 50% to 99%) to configurate a monopoly.

The merger in the question would result in a 70% market share, way higher than the legal limit, hence it would be denied by the DOJ.