Working Paper: CEPR ID: DP14628
Authors: Vanessa Alviarez; Keith Head; Thierry Mayer
Abstract: Multinational acquisitions, unlike greenfield investments, can subtract from the number of active competitors. The outcomes for consumers depend on the change in markups and whether new owners implement significant quality or productivity improvements. We assess the consequences of multinational acquisitions in beer and spirits. Rather than confining the study to an individual country,we apply recent methods with minimal data requirements to conduct a worldwide evaluation. After correcting for severe limited mobility bias, owner fixed effects contribute very little to the performance of brands. On average, foreign ownership tends to raise costs and lower appeal. Using the estimated model, we simulate the consequences of counterfactual national merger regulation. The US beer price index would be 4--7\% higher had competition authorities not forced divestitures. On the other hand, up to 30\% savings could have been obtained in Latin America by emulating the pro-competition policies of the US and EU.
Keywords: Oligopoly; Markups; Concentration; Firm Effects; Brands; Frictions; Mergers and Acquisitions; Multinationals; Competition Policy
JEL Codes: F12; F23; F61; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| foreign ownership (F23) | raises costs (J30) |
| foreign ownership (F23) | decreases brand appeal (M37) |
| owner of a brand (M37) | brand performance (L25) |
| distant headquarters ownership (F23) | negatively affects cost-adjusted appeal (Q51) |
| consolidation of brands under common ownership (L22) | observed increases in markups in the beer and spirits markets (L66) |
| multinational acquisitions (F23) | reduction in the number of active competitors (L19) |
| reduction in the number of active competitors (L19) | increased markups for consumers (D49) |