Do Mergers Reduce “Political Competition”?

In response to my Monthly Essay in March 2012 , (“Mergers:  Are the Promoters Ahead of the Regulators?”), a colleague responded:

“I would go further myself.  I am willing to forego supposed benefits flowing from increased scale if it would mean smaller entities competing more vigorously (because there are more of them) in the economic or political marketplace.”

“Consider Green Mountain Power and CVPS in Vermont.  Note that a merger here is compelling because both companies are tiny.  Yet, a political dynamic is lost forever.  And this political competition is important because an ever-rising proportion of resource decisions are made in the political, rather than the economic, marketplace.  (For example state and local gov't spending, plus federal gov't spending divided by GDP is now twice what it was in 1947…. almost 40% today vs. 20% back then).”

Any other thoughts?

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