When a firm acquires rival firms in one market, and moves their capacity to
another market, should antitrust authorities be concerned? We address this
question by studying a multi-stage game. A dominant firm has the opportuni
ty to acquire fringe firms that operate in the same market. Then, the domin
ant firm has the opportunity to move capacity from that market to a second
market. The model is motivated by a series of acquisitions in the Specializ
ed Mobile Radio industry aimed at establishing a new cellular carrier. We d
erive necessary and sufficient conditions for the dominant firm to acquire
too little capacity relative to the social optimum, The results shed light
on the Consent Decree negotiated in US v. Motorola Inc. and Nextel Communic
ations Inc., 1994.