First, go back to the StudyPlan for "Monopoly" and review the section on Monooly and Antitrust Policy.

Then based on the following case study, what would you recommend as the best policy: should this merger be allowed? (note, you can find the actual government decisionhere.)

Nestle merger

Merger of Nestl and Dreyer's Gains F.T.C. Support

The Federal Trade Commission said yesterday that it would allow Nestl to proceed with the $2.8 billion merger of its United States ice cream business with Dreyer's Grand Ice Cream.

The decision came a year after Nestl and Dreyer's first announced their merger intentions. Together the companies would have controlled about 60 percent of the American ice cream market. Nestl, which has made several acquisitions in the ice cream business in recent years, wanted to acquire Dreyer's to become a more formidable competitor against Unilever, which markets the Ben & Jerry's brand.

Officials at both Nestl and Dreyer's said they expected the merger to be completed after the close of trading today. The new company will be called Dreyer's Grand Ice Cream Holdings and will be based in Oakland, Calif., the site of Dreyer's current headquarters. Analysts said Nestl and Dreyer's had retained their most valuable brands and would be on equal footing in a battle for market share with Unilever.

''We are extremely pleased that the F.T.C. cleared the transaction,'' said Laurie MacDonald, a spokeswoman at Nestl USA. Ms. MacDonald said that because the deal was an all-stock transaction, she did not know the current value of the merger.

In recent years, the F.T.C. has sought to block several deals in the food and beverage sector because of antitrust concerns. The commission has challenged mergers of companies in the baby food, pickle, cat food and rum businesses. But analysts said they were surprised that the F.T.C. had taken so long to approve the ice cream merger.

However, you do not need to agree with this decision. I would like you to think through, based on what we have studied, should this merger have been permitted/ Concepts you may want to use include:

• The HHI index
• Economies of scale
• Monopoly profits
• Oligopoly firm behavior

Your decision will include reference to the data for ice cream market shares. Note that data are available for the premium ice cream market (product with a high fat content) and the more inclusive all store-bought ice cream market. Also, note that common brand names for ice creamBreyers, Ben&Jerry's and Haagen-Dazare manufactured by corporates with other names.

Choose from the following:

A) The merger should be permitted with no additional recommendations.

B) The merger should not be permitted at all.

C) The merger should be permitted with minor limitations (specify the limitations).

D) The merger should be permitted with major limitation (specify the limitations).

Nestle proposed to merge its U.S. ice cream business with Dreyers' ice cream.

Current market shares are:

Premium (high fat) ice cream market

Unilever (makes Breyers and Ben&Jerry's) 41%

Nestles (makes Haagen-Dazs) 37%

Dreyers 19%

Others 3%

Total store-bought ice cream market

Unilever 21%

Dreyers 18%

Blue Bell 6%

Nestle 4%

Wells 3%

Armour 3%

Other brands 45%