In my point of view megamergers are a threat to our society because of the growing imbalance between public and private power in society. Megamergers are a threat because they handle our economy the way they want to. For instance mega mergers can lower or higher the prices on their products whenever they want to and can produce products of low quality for a high or low cost. “Mergers could raise profits…they could improve cost efficiency, reducing costs per unit of output for a given set of output quantities and input prices.” This affects consumers because even though the product that they buy is of lesser value compared to the other businesses the quality of the product might not be as good as the one from other businesses. For example, the gasoline from H-E-B is at lower cost than gasoline from Valero, but the gasoline from H-E-B evaporates faster than the one from Valero therefore the consumer will spend more money buying gasoline from H-E-B than from Valero. “Mergers may improve profits through the exercise of additional market Power in setting prices.” An increase in the concentration or market share might reinforce the firm to higher rates on the goods or services it produces and also raising profits by receiving excess money from consumers without any improvement in efficiency. Even though some mega mergers might help the community by raising funds to help local schools or organizations that help the needy and or donating certain products or percentages there are some that do not help the community they are part of at all. Megamergers can grow a business by gobbling up smaller businesses, but without a good strategy, they are vulnerable to any market shift that puts the acquired companies under stress.
Jalal D. Akhavein*
Department of Economics
New York University, New York, NY 10012
Wharton Financial Institutions Center
University of Pennsylvania, Philadelphia, PA 19104