Supplier market power—such as the ability of branded goods suppliers to dictate terms to retailers—is an important feature of many markets. We show that supplier power can counteract the effects of downstream mergers on consumer prices where there are two-part contracts. This is because greater market power allows suppliers to set contracts that internalise partially the impact of the merger on downstream prices. Post-merger, the supplier reduces the per-unit price at which it supplies the merged downstream firms, with the aim of maintaining total industry profitability—and then recoups the profits via a larger fixed fee. We modify the standard upward pricing pressure (UPP) formula to account for the supplier’s response to a horizontal merger in the downstream market, while preserving much of the simplicity of the standard approach.

供应商的市场力量——例如品牌商品供应商向零售商发号施令的能力——是许多市场的一个重要特征。我们表明，在存在两部分合同的情况下，供应商力量可以抵消下游合并对消费者价格的影响。这是因为更大的市场力量允许供应商制定合同，将合并对下游价格的影响部分内部化。合并后，供应商降低向合并后的下游企业供货的单位价格，以维持行业总体盈利能力，然后通过更高的固定费用收回利润。我们修改了标准上行定价压力 (UPP) 公式，以考虑供应商对下游市场横向合并的反应，同时保留标准方法的大部分简单性。