Question

Why would the FTC and the Justice Department be concerned about the merger of two strong companies in a market with few competitors? What advantages could the newly-formed company have?

Answer 1

1. A merger refers to the formation of one big company from the combination of two different companies. A merger is usually formed in order to increase the efficiency of the merging companies. The FTC and the Justice Department will be concerned about the merger of two strong companies with few competitors because such merging can result in market dynamics, that will increases the market price of the goods involved, reduce the quality of those goods and services, reduce innovation and introduce monopoly.

2. The advantages that could accrue to the newly formed company include the following:

A. Competitive advancement: the merged company will be in a better position to outdo its competitors.

B. Increase market share: the merged company will have access to a larger geographical are and market.

Other advantages are economies of scale and increased quantity of business assets.

Answer 2

Because there is no competition, there is no great
incentive to control cost or to use resources efficiently.
There is no need to spend much money on research
and development, to improve processes, to develop new products, or to be responsive to customer needs.

And an advantage could the newly -formed company have is that the monopolist can charge higher prices and provide poorer quality and service.
poorer quality and service.