EMPIRICAL-EVIDENCE ON VERTICAL FORECLOSURE

Recent papers have shown conditions under which vertical mergers can r esult in anticompetitive foreclosure of unintegrated rivals. One impli cation of these models is that a necessary condition for anticompetiti ve foreclosure is that unintegrated rival firms are less profitable af ter a vertical merger. We test this hypothesis by examining the stock prices of unintegrated rivals at the time of a vertical merger announc ement and at the time of a government antitrust complaint. We find no evidence to support the foreclosure hypothesis.