Asked by Doris Mansueto on Jul 14, 2024
Verified
Which of the following findings would be the most likely to lead the U.S. Justice Department to block a corporate merger under terms of the Clayton Act?
A) a buyer-seller relationship between the two firms
B) a high pre-merger Herfindahl index in the industry and a large boost in the index because of the merger
C) a low pre- and post-merger concentration ratio in the industry
D) evidence that one of the firms is highly unprofitable
Clayton Act
A U.S. antitrust law enacted in 1914 aimed at promoting competition among businesses by prohibiting certain types of conduct that would lead to anti-competitive practices.
Herfindahl Index
A measure of market concentration, calculated by squaring each firm's market share and then summing these squares, used to assess competition.
Pre-Merger
The phase before the completion of a merger in which planning and negotiation occur.
- Scrutinize the impact mergers and market typologies exert on the Herfindahl index.
- Determine the legislative measures associated with antitrust regulation and their impact on commercial practices.
Verified Answer
AN
Amber NicoleJul 16, 2024
Final Answer :
B
Explanation :
The Clayton Act is designed to prevent anticompetitive mergers that could lead to decreased competition and increased prices for consumers. A high pre-merger Herfindahl index indicates that the industry is already concentrated, and a large boost in the index because of the merger suggests that the merger would significantly reduce competition, which is a primary concern under the Clayton Act.
Learning Objectives
- Scrutinize the impact mergers and market typologies exert on the Herfindahl index.
- Determine the legislative measures associated with antitrust regulation and their impact on commercial practices.