The Tall and the Short of Horizontal and Vertical MergersIssue 11-20-17 |
Horizontal mergers, which are the acquisition of one competitor by another, is often looked at with some scrutiny, due to the loss of competition and greater potential concentration of a market due to fewer players. Vertical markets tend to have less scrutiny, even though one of the key motivations for such integration between a customer and a supplier is to better ensure access to a product or to a market for a product. This integration could lead to less competition or reduced access to markets as well.
The AT&T Inc. bid for acquiring Time Warner Inc. is a vertical merger, and it does have its historical precedence. AOL & Time Warner had their much larger merger approved, although it failed as a business combination. More recently, Comcast Corps.’s 2015 acquisition of NBCUniversal is very similar, but smaller, acquisition of a cable provider taking control of a content provider.
Another issue with this transaction is the role that the Justice Department may have with the deal being blocked. President Trump is no fan of CNN’s coverage of his presidency, and his tweeting anti-CNN content may be construed as directly opposing the acquisition. The Justice Department has to remain unbiased in its consideration of the transaction.