Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 16

Social Dynamo Corporation earned profits last year of $49 million on sales of $500 million. During the same period, its major competitor-EIO Corp.-enjoyed sales of $490 million and earned profits of $52 million. Currently, Social Dynamo is negotiating a deal in which it would acquire the assets of EIO in a transaction Wall Street values at $120 million. A successful merger between the two companies is expected to raise prices in the market by 2 percent. Is Social Dynamo obligated to notify the U.S. Justice Department and the Federal Trade Commission of its merger intentions? Explain.