Conglomerate effects arise when a merger has an effect on competition, but the merging firms’ products are not in the same product market, nor are they inputs or outputs of one another.
Mergers exhibiting conglomerate effects have taken on a new prominence in the digital era, as the largest technology companies use acquisitions as a key part of their product development, expansion and recruitment strategies. These transactions are generally considered to be procompetitive: they can allow the combination of complementary skills and assets, improve interoperability, and facilitate innovation. However, there can also be some potential competition concerns associated with these mergers. They include the potential for bundling and tying, reduced innovation incentives, and co-ordinated effects.
Investigating conglomerate effects can be particularly difficult, as it is not straightforward to identify when they are likely to arise. Information gathering, addressing uncertainty in the development of the market, and assessing remedies for conglomerate effects are some of the key challenges faced by competition authorities in these cases.
