We develop a bilateral oligopoly framework with manufacturer-retailer bargaining to analyze the impact of retail mergers on market outcomes. We show that the surplus division between manufacturers and retailers depends on three bargaining forces and can be interpreted in terms of an “equilibrium of fear”. We estimate our framework in the French soft drink industry and find that retailers have greater bargaining power than manufacturers. Using counterfactual simulations, we highlight that retail mergers increase retailers’ fear of disagreement relative to that of manufacturers, which weakens their buyer power and leads to higher wholesale and retail prices.