I like this kind of proposal, where some kind of natural negative feedback loop is created.

That said, maybe it depends on why the competitors stock changes. What if competitors' stocks fall because people believe competitors are doomed now that the merging forces have become so big they will eat everything?

Another concern: If an already-concentrated industry sector develops a covert agreement not to ruffle one-another's mergers, which would just exacerbate an existing problem.

"shows that rival stock prices often rise when a merger is blocked"

There's definitely a story that many mergers are irrational. People in many parts of the US are worried about losing our local pharmacy because of a series of failed mergers. CVS buying the Caremark PBM was probably the last successful merger in the sector. Notably the UK chain Boots bought the US chain Walgreens which was a mistake because Boots (in a country where pharmaceutical prices are artificially low) has no idea of the dynamics of the business in the US (a country where pharmaceutical prices are artificially low.)

Boots made a mistake which has been common in that industry which is to think that it could greatly improve "front of store" sales of packaged food, beer, shampoo and stuff in Walgreens. On one hand there's the probably that after you've paid for health insurance and paid for your drugs you don't have money to buy anything in the front of the store. There's also the problem that retail is fiercely competitive and anything you could get front of store at Walgreens you could get at a supermarket or Target or Walmart or Amazon for less -- and you can fill your prescriptions there too.