July 14, 2014

How a major merger can affect competition

When a major merger takes place, it may be subject to regulatory scrutiny. There is good reason for this because a significant deal has the potential to seriously impact consumers as well as competitors. Sometimes the effects will be positive, but steps must be taken to ensure that consumers and competitors are treated fairly.

There are several ways a merger impacts consumers. When two major companies join forces, it has the potential to limit the availability of choices. For example, if two large cable companies were to merge, it would limit consumer choice.

Not only would it limit consumer choice but it could also give the combined company too much power, allowing it to dominate the market landscape. When this happens, it can put a damper on competition. 

One recent example of this is the deal between Comcast and Time Warner Cable. Comcast is in the process of trying to acquire Time Warner, but according to an article in the Wall Street Journal, Dish Network has approached the Federal Communications Commission saying it wants the deal to be rejected.

The reason behind this is that if the deal were to be approved, Dish Network believes it could be harmful to competition. The company believes the merger would give Comcast/Time Warner control over several aspects of the Internet.

The article goes on to explain that Dish Network is not the only company to have taken issue with this potential deal. Media companies responsible for supplying TV programming also have concerns but as the article notes, have been hesitant to publicly voice them. 

Whether or not the deal will receive regulatory approval remains to be seen. Companies looking to secure a more competitive place in the market should consult an M&A advisor to determine a sound acquisition strategy