https://en.wikipedia.org/wiki/Depository_Institutions_Deregu...

With your example, the local stores could have joined forces to compete against their bigger competitor: the supermarket.

Mergers are not the only way in which market concentration happens though. You can't ban asset sales and you can't ban companies from hiring employees of weaker or defunct competitors.

If the owners of Figma decided that Figma wasn't viable as a standalone company, they could sell the software and fire all employees so they could be re-hired by whoever bought the software. No regulator in the world would mandate the software to be destroyed and the employees exiled.

Also, I don't think a market without mergers and acquisitions would necessarily be very competitive. It could well trend towards an equilibrium where a few big incumbants would rule their respective turfs unchallened and a large number of tiny companies without the capital to do anything big.

I think merging legal entities is just a more efficient, less messy way of handling asset sales.

In the mainstream economist view, mergers are generally good, both for the companies and society. If they don't produce some efficiency surplus, there is no reason for the companies to do them.

Every time a company merges, say 10% of the combined value of the new company is given to the government (perhaps with a discount if one or other of the merging companies has recently paid the merger tax).

The lack of the 10% fee for a company who didn't merge is effectively compensation for the fact it has less market control than peers in the same market who did merge.

If instead of Adobe buying Figma, it was Adobe's biggest competitor, that would probably increase competition by making that company a more viable competitor to Adobe.

Joint-ventures might also be a postive. I can think of ARM, and the alignment in the automotive industry to standardise parts and platforms to lower total costs.