Some Empirical Evidence on the Effectiveness of Antimerger Relief in the United States

Abstract

The extent of structural relief obtained by the government in a Section 7 settlement is modeled as an outcome of a bargaining game between the antitrust agency and parties to the merger. This framework is applied to data from 73 Section 7 cases settled during 1990-2000. The fraction of competitive overlap subject to divestiture is shown to depend on the extent of merger-specific efficiencies, the anticompetitive potential of the merger, and the hostage effect facing the merging firms, as well as the degree of media coverage of the case, the workload of the agency, and the partisan composition of Congress. (JEL L44, C24) *I thank Erwin Blackstone for many thoughtful comments on earlier drafts as well as Donald Basch, Neelam Jain, and an anonymous referee for making useful suggestions.

An Empirical Analysis of Mexican Merger Policy

“…Bergman et al (2005) used a logit model to analyse merger decisions in the European Commission, finding results similar to those reported by Khemani and Shapiro (1993). Kouliavtsev (2005) studies the effectiveness of negotiated relief in merger cases in the United States as an outcome of a bargaining game between the antitrust agency and parties to the merger. Kouliavtsev finds that the structural relief (divestiture) depends on the extent of merger-specific efficiencies, the anticompetitive potential of the merger, and the hostage effect facing the merging firms, as well as the degree of media coverage of the case and the partisan composition of the Congress.…”

What Have We Acquired and What Should We Acquire in Divestiture Research? A Review and Research Agenda

“…Although it has been acknowledged in strategic management research that divestitures have several important macro-and industry-level effects (e.g., increased industry concentration), few strategy scholars have directed their empirical attention to these effects. Instead, the macro-or industry-level implications of divestitures are much more extensively researched in empirical studies on privatization, liberalization, and the effectiveness of public sector interventions in connection with antitrust issues (e.g., Datta, 2003;Kouliavetsev, 2005;Lee, Lee, & Kim, 2004). These studies, for example, explore the impact of divestitures on the supply quantity and prices in an industry (Lee et al, 2004), market shares and factor productivity (Datta, 2003), or collaborative and competitive structure of an industry after a divestiture has been ruled by antitrust authorities (e.g., Kouliavetsev, 2005;Nambu, 1997).…”

An Empirical Analysis Of Mexican Merger Policy

“…(2005) used a logit model to analyze merger decisions in the European Commission finding results similar to those reported by Khemani and Shapiro (1993). Kouliavtsev (2005) studies the effectiveness of anti-merger relief in the United States as an outcome of bargaining game between the antitrust agency and parties to the merger. Kouliavtsev finds that the structural relief (divestiture) depends on the extent of merger-specific efficiencies, the anticompetitive potential of the merger, and the hostage effect facing the merging firms, as well as the degree of media coverage of the case, and partisan composition of the Congress.…”