Which of the following statements regarding mergers and acquisitions (M&A) is FALSE?[Fill in the blank]

Question

BlackTom AI · Accepted Answer

Horizontal (same-industry) mergers increase market power by reducing the number of competitors, which can allow surviving firms to raise prices and earn higher profits.

1) Relevant knowledge points and concepts
- Horizontal merger: combination of firms in the same market; tends to reduce competition and increase market power for merging firms.  
- Vertical integration: acquisition of a supplier or distributor to improve coordination, control inputs, or quality.  
- Welfare effects: higher prices from reduced competition typically harm consumers; the impact on non-merging rival firms is ambiguous—they may gain (by charging higher prices too) or lose (if market share shifts).

2) Step-by-step reasoning
- The statement in option c claims two things: (i) “only the merging company benefits when competition is reduced,” and (ii) “all companies in an industry pay the associated costs.”  
- Evaluate (i): When competition falls, the merging firm(s) usually benefit by gaining market power, but rival firms can also benefit if prices rise across the industry—non-merging incumbents can see higher margins. Thus it is false that only the merging company benefits.  
- Evaluate (ii): The costs of reduced competition (higher prices, lower consumer surplus) are borne primarily by consumers and potential entrants; incumbent firms do not uniformly “pay” these costs—some benefit, some are harmed. Hence it is false that all companies in the industry pay the costs.

3) Calculations
- None required for this conceptual question.

4) Why the correct answer is correct
- Option c is false because it misstates distributional effects: benefits from reduced competition are not exclusive to the merging firm, and costs are not necessarily borne by all firms—consumers and some market participants are typically harmed while some rival firms may gain.

5) Why the other options are correct (briefly)
- a: True — horizontal mergers can reduce competition and increase profits.  
- b: True — principal benefit of vertical integration is improved coordination and aligned objectives.  
- d: True — vertical control of inputs can allow product improvement or quality control.

6) Conclusion
- Therefore option c is the false statement; this matches the provided answer (c).

Which of the following statements regarding mergers and acquisitions (M&A) is FALSE?[Fill in the blank]单项选择题

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