How could the merger be harmful to consumer?

The relevant product market was defined as jarred baby food and the geo Show more Arguments Against the Merger The relevant product market was defined as jarred baby food and the geographic market as the United States. Sufficiently large HHI figures indicate that a merger is anticompetitive. The premerger HHI score for the baby food industry is 4775 indicative of a highly concentrated industry. The merger of Heinz and BeechNut will increase the HHI by 510 points. This creates by a wide margin a presumption that the merger will lessen competition in the domestic jarred baby food market. It is probable that this merger will eliminate competition between the two merging parties at the wholesale level where they are currently the only competitors for the second position on the supermarket shelves. Although Heinz and BeechNut claim that in areas that account for 80% of BeechNut sales Heinz has a market share of about 2% and in areas that account for about 72% of Heinz sales BeechNuts share is about 4% there is evidence that Heinz and BeechNut are locked in an intense battle at the wholesale level to gain (and maintain) position as the second brand on retail shelves. Heinzs own documents recognize the wholesale competition and anticipate that the merger will end it. Indeed those documents disclose that Heinz considered three options to end the vigorous wholesale competition with BeechNut: two involved innovative measures while the third entailed the acquisition of BeechNut. Heinz chose the third and least procompetitive of the options. Finally the anticompetitive effect of the merger is further enhanced by high barriers to market entry. Barriers to entry are important in evaluating whether market concentration statistics accurately reflect the pre and likely post merger competitive picture. If entry barriers are low the threat of outside entry can significantly alter the anticompetitive effects of the merger by deterring the remaining entities from colluding or exercising market power. Low barriers to entry enable a potential competitor to deter anticompetitive behavior by firms within the market simply by its ability to enter the market. Existing firms know that if they collude or exercise market power to charge supra-competitive prices entry by firms currently not competing in the market becomes likely thereby increasing the pressure on them to act competitively. In this case there had been no significant entries in the baby food market in decades and new entry was difficult and improbable. This finding seems to eliminate the possibility that the reduced competition caused by the merger will be ameliorated by new competition from outsiders. STOP! ANSWER THE FOLLOWING QUESTIONS. Are the barriers to entry high or low for this market? What are they? How could the merger be harmful to consumer? Show less

Place New Order
It's Free, Fast & Safe

"Looking for a Similar Assignment? Order now and Get a Discount!

Feeling Lucky?

Enter your email address to spin the wheel for a chance to win exciting offers.