The Effects of Mergers on Sellers, Customers, and Competitors in Russia's Ferrous and Non-Ferrous Metal Industries: The Application of Financial Event Study

Abstract

Russian producers are large participants in both domestic and international markets of ferrous and non-ferrous metals. Their market power is limited on the world market due to the presence of competitors, while in Russia most of them have achieved an “almost monopolistic” position strengthened by a high market share as a result protection from import tariffs. During 1999-2011 numerous mergers in these industries were completed and approved by the Federal Antitrust Service – Russia’s competition agency. The key problem of merger analysis in Russia’s ferrous and non-ferrous metal industries is the trade-off between a (possible) weakening of competition in domestic markets and achieving competitive advantages in international markets. Most merger deals were approved only together with precisely developed merger remedies aimed at preventing dominance abuse. However, it is still unknown whether the weakening of competition and the abuse of dominance on the domestic market as the result of a merger indeed lead to harmful consequences. Using the financial event study method developed by Eckbo and Wier (1985), this paper empirically verifies the significance of anticompetitive effects of mergers in the domestic ferrous and non-ferrous metal markets. I find that, according to the financial market, mergers between Russian metal producers restrict competition and reduce consumer gains.