The Price and Profit Effects of Horizontal Merger: A Case Study

A recent Federal Trade Commission (FTC) antitrust suit against Xidex Corp., challenging its acquisitions of Scott Graphics Inc. in 1976 and Kalvar Corp. in 1979, provides a rare opportunity to view price behavior before and after the acquisitions. The price data used are actual contract prices for 18 configurations of diazo and vesicular microfilm for contract years 1973-1982. Prices in each of these well-defined product lines were found to rise after the acquisition took place. The price increases produced substantial profit gains, in each case enough to recover the cost of the acquisition in about 2 years. Litigation in the FTC antitrust suit against Xidex started in December 1981 and ended in March 1982, when Xidex agreed to settlement by consent. The consent permits Xidex to keep the acquisitions with the exception of Kalvar's vesicular technology and expertise, which it is required to divest.