Unilateral effect

Unilateral effect is a competition law term used in the area of merger control. It refers to the ability of post-merger firms to raise prices because of the removal of competitive constraints resulting from the merger, irrespective of the pricing decisions and actions of their competitors. Such anti-competitive effects can be pronounced when two significant competitors merge to create a large, but not dominant player on a market with only a few other competitors. In such a case, particularly when the two merging companies have highly substitute good, it will be rational for the merged company to raise prices to some degree, because it will recapture some of the customers who would have switched away from the product in favour of what was previously a competing product. Such a price increase does not depend on the merged firm being the dominant player in the market. The likelihood and magnitude of such an increase will instead depend on the substitutability of the products in question – the closer the substitute,the greater the unilateral effects. [http://www.http://www.hanselawreview.org/pdf3/Vol2No1Art03Abstract.pdf]