Considerations of Buyer Power in Merger Review

Abstract

Abstract In most horizontal merger reviews, the focus is on the potential for increasing monopoly power, which adversely affects the output market through increased price and reduced quantity, quality, and product variety. For the most part, a merger’s effect on the input markets has been ignored. Recently, however, academics and policymakers have called for considering a merger’s potential for creating or enhancing buyer power in one or more input markets. A good deal of this concern has centered on monopsony in labour markets as real wages have stagnated and labour’s share of income has declined. In order to address the monopsony concern in the USA, Senator Amy Klobuchar proposed a bill that would amend section 7 of the Clayton Act to explicitly include monopsony concerns in merger review. In this article, we explore the economic foundation and empirical evidence for this rising tide of concern with particular emphasis on the labour market. We broaden the significance of our analysis by pointing to allegations of monopsonistic abuse outside labour markets. Finally, we discuss practical problems of implementing monopsony considerations in merger review and the benefits to consumer welfare that may arise.