Answer to Question 1
In a horizontal merger, the acquisition of a competitor could increase market concentration and increase the likelihood of collusion. The elimination of head-to-head competition between two leading firms may result in unilateral anticompetitive effects. A recent example of this involved Staples, Inc., a superstore retailer of office supplies. Staples attempted to acquire Office Depot, another giant retailer in the same industry and clearly a competitor. In many areas of the country, the merger would have reduced the number of superstore competitors, often leaving Staples as the only superstore in the area. The F.T.C. subsequently blocked the merger and avoiding potentially harmful effects such as increased costs to profits, though Staples would have benefited highly from the merger. Vertical mergers involve firms in a buyer-seller relationship. Put another way, a vertical merger is a merger between two firms, one of which is a supplier or distributor for the other and this can harm competition by making it difficult for competitors to gain access to an important component product or to an important channel of distribution. This is sometimes referred to as a bottleneck.
Answer to Question 2
True
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