Suppose there are only two firms (Firms A and B) in Canada that produce good X, and the two firms propose a merger to create a single firm (Firm AB). Is there any circumstance under which the authorities enforcing Canadian competition policy might approve of such a merger?
A) According to the Competition Act, as long as the revenues of the merged firm are less than $100 million per year.
B) According to the Competition Act, if the merged firm enhances the status of a Canadian cultural industry.
C) If the market is defined as being within Canada's borders, and the merger allows Firm AB to exploit economies of scale.
D) If international trade in good X is such that Firm AB faces a fully competitive environment, both within and outside of Canada's borders.

Question

Suppose there are only two firms (Firms A and B) in Canada that produce good X, and the two firms propose a merger to create a single firm (Firm AB). Is there any circumstance under which the authorities enforcing Canadian competition policy might approve of such a merger?
A) According to the Competition Act, as long as the revenues of the merged firm are less than $100 million per year. 
B) According to the Competition Act, if the merged firm enhances the status of a Canadian cultural industry. 
C) If the market is defined as being within Canada's borders, and the merger allows Firm AB to exploit economies of scale. 
D) If international trade in good X is such that Firm AB faces a fully competitive environment, both within and outside of Canada's borders.

Quizplus · Accepted Answer

If international trade ensures that Firm AB remains in a competitive environment, the merger might be approved as it would not substantially lessen or prevent competition.

Suppose There Are Only Two Firms (Firms a and B)