A PYMNTS Company

Benefits of CVS/Aetna merger far outweigh the costs

 |  June 6, 2018

Benefits of CVS/Aetna merger far outweigh the costs

By Benjamin Zycher

Big is bad, in the view of many, and bigger is badder. In the context of many proposed business mergers, that stance makes far less sense than commonly assumed, and it is likely to lead to adverse effects for the very same consumers and U.S. economy that are the supposed beneficiaries of antitrust enforcement.

This pavlovian opposition to mergers almost always shunts aside the potential cost savings for consumers or other efficiencies made possible by combined operations, as well as the possibility that a combination of firms might offset the market power — a substantial ability to influence prices or other parameters — of others in some related dimension of the relevant economic sector.

This analytic error is serious enough in the case of horizontal mergers of firms in the same industry, but it becomes glaring in the case of vertical mergers of firms that do not actually compete because they operate in different industries.

Continue reading…