An acquisition does not result in a net increase in the number of play

QUESTION

An acquisition does not result in a net increase in the number of players in a market.

Indicate whether the statement is true or false.

ANSWER

TRUE
An acquisition does not result in a net increase in the number of players in a market; the effect on competition may be neutral. When a foreign investor acquires two or more firms in a host country, and subsequently merges them, the effect may be to reduce the level of competition in that market, create monopoly power for the foreign firm, reduce consumer choice, and raise prices.