Silviase/jgov_v1.4_full_ann huggingface dataset:
evaluations on the (1) decreasing market scale, (2) market share/HHI (Herfindahl-Hirschman Index), (3) substitutability of a product between business-combined companies (products of Ajinomoto were presumed to have high substitutability with products of makers other than Yamaki, and may have a certain substitutability also with Yamaki products, but the degree of substitutability with Yamaki is presumed to be smaller than that with products of other companies), (4) trends in declining prices, (5) competitors who are taking competitive actions, (6) supply capacity of competitors (competitors are considered having supply capacity), and (7) existence of competitive pressures from adjacent markets of sauces for noodles etc., and misuse with soup stock. As a result, the commission concluded that competitions in a certain field would not be restricted by independent actions by combined companies and/or by coordinated actions between combined companies and their competitors. In this market, through this business combination, combined companies have a combined share of about 70% with the share ranked first. The HHI after this business combination amounts to approximately 5,200, an increase of about 900.

## 2 ) Sugar

As for sugar, New Mitsui Sugar, Taito, and KS merged in April 2005. This merger is not referred to in the examples of major business combinations of the Japan Fair Trade Commission. The degree of sugar shipment concentration (CR5~CR10) is tend to decrease, but comparatively high level. $ ^{10} $ As for the purpose of this merger, the company announced in its brief materials that “The best measure to respond to severe environment is to strengthen corporate competitiveness as a solid company which jointly uses a spoon brand, for example the establishment of an effective production structure on a nationwide scale through the enhancement of nationwide sales channels and unification of sales policies. We have concluded that this great integration of the Mitsui Group will lead to the creation of a true order and stability in the industry and, therefore, have decided on this merger.” In the analysis of this business combination, New Mitsui Sugar, Taito, and KS. prepared the price indexes of 90, 26, and 10 items of product, respectively.

## 3 ) Instant noodles

Regarding instant noodles, Nissin acquired the stock of Myojo on December 2006.

The specific field of trades for the screening of business combination by the Japan Fair Trade Commission include (1) pillow-type instant noodles, (2) cup-type instant noodles, (3) cup-type soup with noodles, (4) chilled noodles, and (5) frozen noodles, from the viewpoint of the forms of the products. The competitive conditions in markets related to the particular field of trade with one another were taken into consideration. $ ^{11} $ The Japan Fair Trade Commission considered the
business-combination from the viewpoints factors in deciding substantial restraint of competition both through unilateral conduct and coordinated conduct: From the former viewpoints, (i) there are several rival firms with market share 10% above, (ii) rival firms have enough available capacity, (iii) large scale retailers as the consumer have strong bargaining power, (iv) there is much competitive pressure from related particular field of trade, etc. From the latter viewpoints, (i) more than sixty firms including small and medium firms have been entered into the markets, (ii) large scale retailers as consumers have strong bargaining power, (iii) price cut incentive is large due to the short product life cycle, (iv) rival firms have enough available capacity, (v) there is much competitive pressure from related particular field of trade, etc. As a result of the screening, the Japan Fair Trade Commission concluded that this business combination would not cause a substantial restriction on competitions in a certain transaction field. In the pillow-type instant noodles market, through this business combination, combined companies have a combined share of about 35% with the share ranked first. The HHI after this business combination amounts to approximately 2,400, an increase of about 500. In the cup-type instant noodles market, a combined share is about 60% with the share ranked first, and the HHI is about 3,500 an increase about 800. $ ^{12} $

### 3. Measurement Model

The measurement model used in this paper compares monthly changes in retail prices of business-combined groups and those of others before and after the date of mergers based on the studies by Ashenfelter and Hosken (2008). The issue to be addressed facing when estimating the effect of business combination regarding prices is a method for controlling factors other than mergers which change depending on the time to evaluate the effect from the use of quantitative data. A method that was used to control these factors is to estimate a “difference-in-difference” and focus on both changes of the subject group and control group. $ ^{13} $

We made estimates using the following regression:

$$ p_{i,j,t}=\alpha_{i,j,t}+\sum_{k=2}^{12}m_{k}k_{i,j,t}+\beta_{11}\big(\mathrm{p o s t m e r g e r}_{i,j,t}\big)+\beta_{12}\big(\mathrm{p o s t m e r g e r}_{i,j,t}\big)*\big(\mathrm{M e r g i n g~P a r t y~P r o d u c t}_{i}\big)+\varepsilon_{i,j,t}, $$
i refers to a product number, j and t represents a regional number, and a period number, respectively. $ \alpha_{i,j,t} $ shows the effects of a product and a specified product in the region and a period. $ k_{i,j,t} $ shows an index (dummy variable) of 1 in the relevant month and 0 in other months. Postmerger $ _{i,j,t} $ shows an index of 0 before business combination and 1 after business combination. Merging Party Product $ _{i} $ shows an index of 1 for a product of the producer and 0 for others. $ \varepsilon_{i,j,t} $ represents an error term. The dependent variable price $ p_{i,j,t} $ shows a price index (proportion of price) weighted by sales.

The fixed-effect term $ (\alpha_{i,j,t}) $ considers the product that remains at a price level permanently different in a different region. This means that a specific price change in a certain month is controlled by an effect of each month $ (m_{k}) $ . The coefficient $ \beta_{11} $ provides a trend in the price changes of each product after business combination, and coefficient $ \beta_{12} $ provides price changes of each product of the business-combined company after the trend in price changes of each product has been controlled. $ ^{14} $

We made estimates of trends in sales (sales amount) before and after business combination using the following regression:

$$ T_{i,j,t}=\alpha_{i,j,t}+\sum_{k=2}^{12}m_{k}k_{i,j,t}+\beta_{21}\big(\mathrm{p o s t m e r g e r}_{\mathrm{i},\mathrm{j},\mathrm{t}}\big)+\beta_{22}\big(\mathrm{p o s t m e r g e r}_{\mathrm{i},\mathrm{j},\mathrm{t}}\big)*\big(\mathrm{M e r g i n g~P a r t y~P r o d u c t}_{\mathrm{i}}\big)+\varepsilon_{i,j,t}. $$

The explanatory variables $ \alpha_{i,j,t} $ , $ k_{i,j,t} $ , postmerger $ _{i,j,t} $ , Merging Party Product $ _{i} $ , and $ \varepsilon_{i,j,t} $ are the same as those in (1) above. The coefficient $ \beta_{21} $ provides a trend in changes of sales of each product after business combination, and coefficient $ \beta_{22} $ provides price changes of each product of the business-combined company after the trend in price changes of each product has been controlled.

The dependent variable price $ p_{i,j,t} $ shows a sales index (proportion of sales ) weighted by sales.

We made estimates of changes of the amount-based share of each company caused by business combination using the following regression:

$$ s_{i,j,t}=\alpha_{i,j,t}+\beta_{31}\big(\mathrm{postmerger}_{\mathrm{i,j,t}}\big)+\beta_{32}\big(\mathrm{postmerger}_{\mathrm{i,j,t}}\big)*\big(\mathrm{Merging Party Product}_{\mathrm{i}}\big)+\varepsilon_{3i,j,t}. $$

The explanatory variables $ \alpha_{i,j,t} $ , postmerger $ _{i,j,t} $ , Merging Party Product $ _{i} $ , and $ \varepsilon_{i,j,t} $ are the same as those in (1) above. As the sales share of each company is divided by the total monthly volume, a specific effect in a certain month considered being removed in advance. Because of this, the panel estimate
does not include a monthly dummy in the model. The coefficient $ \beta_{31} $ provides a trend in share changes of each product after business combination, and coefficient $ \beta_{32} $ provides price changes of each product of the business-combined company after the trend in price changes of each product has been controlled.

The dependent variable price $ s_{i,j,t} $ shows a sales share.

Both these estimates (2) and (3) allow us to analyze, by extracting the development of the business-combined company before and after business combination how the sales and shares of combined companies have developed in the entire market movement.

The data used here are the total POS data of more than 600 stores in eight regions (Hokkaido, Tohoku, North Kanto, the metropolitan area, Hokuriku, Tokai, Kinki, Chugoku, Shikoku, and Kyusyu) and consist of weekly sales and quantity. For an estimate, the weekly sales were integrated into monthly sales. Household flavor seasonings have more than 3,000 items out of which the items of Ajinomoto and Yamaki were 106 and 131, respectively, from the beginning of January 2006 to the end of December 2009 for each JAN code. $ ^{15} $ As for sugar, the data are the similar one with 850 items from January 2004 to December 2007. As for instant noodles, we integrate the pillow-type instant noodles and cup-type instant noodles for the analysis, and the date of 2,200 items are the monthly one from January 2005 to December 2008 for each JAN code.

### 4. Estimation Results

## 1 ) Household flavor seasonings

We explain the estimate methods on the basis of data for household flavor seasonings relating to this business combination as follows. According to the fixed effect model that is appropriate based on the Hausman test, the estimate on price indexes of Ajinomoto and Yamaki products using the fixed effect model are shown in Table 1. Because observations of individual panel estimate are aggregated by its products and products are sold area, the number of observations is proportional to the number of items. But that does not reflect the difference between sales of goods. Therefore, we have made estimates of the panel over the observation period, weighted by sales of the product. This Table shows that the coefficient is positive and significant for the term concerning an increase of prices after business combination (post-merger) and the coefficient is also positive and significant for the cross-term concerning products combined after the business combination of Ajinomoto and Yamaki. That is, it follows that the market price level of the products of each company has trended to rise through business combination and the product prices of the combined companies have also been raised. This result supports short-run pricing increase effect of Focarelli and Panetta (2003).
## (Table 1)

These results can also be confirmed by the movement of the price index of the following brand-by-brand product. Figure 1 shows the estimate of the price index of Ajinomoto products, which are compared with all products, and Figure 2 shows the estimate of the price index of Yamaki products. The crossterm coefficient of Ajinomoto is positive and highly significant, while that of Yamaki is negative and highly significant. It follows that Ajinomoto has raised its price level above the price level of all products, while Yamaki has lowered its price level below that of all products. One possibility that is implied by this findings is that merging parties review the product positioning and differentiate their products in order to not only avoid cannibalization but also make new consumers (See Gandhi, et al., (2008), Sweeting (2010)). In particular, among the differentiated product, less expensive product (Yamaki) was less expensive, by contrast more expensive product (Ajinomoto) more expensive. This business combination may lead to the party to obtain more consumer surplus rather than before by extending differentiated products line-up. We have made estimates of the panel reflected the effect of Ajinomoto (larger market share) raised price rather than that of Yamaki (smaller market share) lowed its price due to the estimation weighted by gross sales price of the product.

## (Figure 1 and Figure 2)

The Figure 1 shows the comparison of price indexes between all products and Ajinomoto products, and Figure 2 shows the comparison of price indexes between all products and Yamaki products. These tables show trends in the total price weighted by the share of the price index of each product to the entire sales amount of the company for each product in the base month. $ ^{16} $ As shown in Figure 1, the relative price level of Ajinomoto products in the base time declined compared with all products or was maintained shortly after the business combination, but rose after several months of the business combination, and thereafter, the price level also remained at larger than 1 (relatively higher). The relative price level of Yamaki products began to decline shortly after the business combination, and thereafter, remained at smaller than 1 (relatively lower). This gap of timing between the Ajinomoto's price increasing and the Yamaki's price decreasing is something caused by strategic behavior of the merging party.
The trends in the retail price levels of business-combined companies are shown above, and then Ashenfelter and Hosken (2008) provided an implication of the price level through an ex-post examination. In this study, we evaluated the trends in sales and shares of the business-combined companies by the same method, in addition to the examination of this price level. Through this method, for example, whether or not combined companies have market power to increase sales by raising the retail price level, and how the market share has changed through the business combination are shown.

The estimate results are shown in Tables 2 below:

## (Table 2)

The table shows that the term (post-merger) of the entire sales of each company is positive and highly significant in the market after business combination, showing an increase in sales. However, the term (crossterm) of change of the sales of the combined companies shows a negative and highly significant coefficient, thereby, we can find that sales of the business-combined companies have decreased. In a change in the share as well, the term of the market share of each company shows a positive and highly significant coefficient as a result of the business combination, and the business combination has increased the share of each company though it is very small. Accordingly, we can point out that the number of brands may have slightly decreased though the numbers have not changed significantly. In contrast, the term (crossterm) of change in the share of the business-combined companies shows a negative and highly significant coefficient, and a decrease in the shares of the combined companies as a result of the business combination. That is, it follows that this business combination has increased the sales level of non-merging firms in the entire market, but has decreased the total sales of both companies compared with those before the business combination and has also reduced the share of the combined companies.

## 2 ) Sugar

The results of these panel estimates are shown in Table 3 $ ^{17} $ . A fixed effect model is adopted based on Houseman test. The price level after the business combination shows a positive and highly significant coefficient, and the crossterm also shows a positive and highly significant coefficient, which are considerably large coefficients. Namely, this table shows that, with this business combination, the price level rose in the entire market and the combined companies also could have raised the price level.

(Table 3)
The outline of trends in the price index of all sugar products and the price indexes of New Mitsui Sugar, Taito, and KS can be understood in Figure 3, Figure 4, and Figure 5. The prices of New Mitsui Sugar rose more than those of all products after several months to about one year of the business combination. In contrast, the prices of Taito lowered.

(Figure 3, Figure 4, and Figure 5)

The trends in retail price levels of the business-combined companies are shown above, and the trends in their sales and shares are shown in the following Table 4.

(Table 4)

According to the table, clear effects are not seen as the sales of non-merging firms show a negative and insignificant coefficient, but the term (crossterm) of change in sales of the business-combined companies shows a negative and highly significant coefficient. As for changes in the share of each company, the term of the share of each company in the market shows a positive and highly significant coefficient as a result of business combination. Thus, we can point out that the share may have increased though very small as a whole and the number of brands may have slightly decreased without a significant change. On the other hand, the crossterm, which shows the effect of the combined companies, shows a negative and highly significant coefficient. These tables show that, with this business combination, the sales of combined companies fell below the total sales of three companies before the business combination, and also the share after the business combination fell below the total value before the business combination.

## 3 ) Instant noodles

The results of these panel estimates are shown in Table 5 $ ^{18} $ . A fixed effect model is adopted based on Houseman test. The price level after the business combination shows a negative and highly significant coefficient, and the crossterm also shows a positive and highly significant coefficient, which are considerably large coefficients. Namely, this table shows that, with this business combination, the price level lowered in the entire market though, the combined companies could have raised the price level.

(Table 5)
The outline of trends in the price index of all sugar products and the price indexes of Nissin and Myojo can be understood in Figure 6 and Figure 7. The prices of Nissin lowered more than those of all products after several months to about one year of the business combination. In contrast, the prices of Myojo rose

(Figure 6 and Figure 7)

The trends in retail price levels of the business-combined companies are shown above, and the trends in their sales and shares are shown in the following Table 6

(Table 6)

According to the table, the coefficient of sales of firms in the market show a negative and significant, but the term (crossterm) of change in sales of the business-combined companies shows a positive and highly significant coefficient. As for changes in the share of each company, the term of the share of each company in the market shows are not clear in the coefficient as a result of business combination. Thus, we cannot point out that the share may have increased though very small as a whole and the number of brands may have slightly decreased without a significant change like household flavor seasonings and sugar. These tables show that, with this business combination, the sales of combined companies increased in the total sales of merged companies before the business combination, and it is not clear that the share after the business combination rose or lowered the total value before the business combination.

### 5. Consideration

Estimate results include the follow facts:

i) In the markets of flavor seasoning, sugar, and instant noodles which are the subjects of this study, the weighted average price level of the business-combined companies has been raised from the previous level, and the rise has been higher than the rise in the retail price level in the markets.

ii) The following facts are found in the details of each business-combined company: The facts, which are also pointed out by Ashenfelter and Hosken (2008) in their oil example, show examples of the business combinations for both household flavor seasonings and sugar show that the business combination raised the price of the corporate brand of one of the business-combined companies and has not changed or somewhat lowered such price of the other combined company, particularly, showing a raise in the price of the brand of the company with a large market share, which is
generally deemed to be influential, and a trend to keep the price of the other company. $ ^{19} $

iii) In contrast, the business combination reduced the sales and shares of the combined companies below the arithmetic total value before business combination. Therefore, in these business combinations, it is not considered that market power has been exercised and that the markets have been substantially restricted competition.

The above implies that business combination may have reduced competitive pressure due to a reduction in the number of competitors and raised the price level in the entire market, which may have led to an increase in the market power of the combined companies and a price raise at a level higher than that in the market. However, therewith, a business-stealing effect could have taken place between combined companies, and the sales and the share of sales of each company could have been reduced in an oligopolistic competitive equilibrium. It may be considered that profits of combined companies cannot always increase (may decrease) through business combination and the price setting behavior associated, therewith, unless the business combination improves efficiency to a certain degree.

We consider that the study of Ashenfelter and Hosken (2008) focused primarily on trends in prices, while the above is shown as a result of the fact that examination of sales and shares before and after business combination allowed us to comprehend the impact on the entire corporate strategy in the wake of business combination and understand the impact of business combination from more various aspects. Through this study, we were able to quantitatively confirm the basic principle of the theory of industrial organization, and show that a key to the corporate strategy for business combination/purpose of regulations on business combination is the increase of efficiency and the examination thereof is important. This is one of the contributions of this study.

We would like to point out that one of the priority of merger control policy is the unilateral effect. The reason is that the result of this study validates that ex-post merger examination of price effect shows that 0.13 – 4% points increasing in merged party’s price level than overall market price level through difference-in-difference analysis. In addition, it goes without saying that, for corporations, only a business combination to enhance efficiency is a target business combination. However, also from the viewpoint of the competitive policy and social welfare, the enhancement of efficiency is called on in the business combination so it is desirable that the achievement of business combination is returned to the market through competitions, for example, in the form of a price reduction. Further, discussions on a method for quantitatively measuring such approaches in the screening of business combination are a future challenge.

Analyzing the situation before and after of business combination can not deal with