The Deterrence Effects of U.S. Merger Policy Instruments

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: We estimate the deterrence effects of U.S. merger policy instruments with respect to the composition and frequency of future merger notifications. Data from the Annual Reports by the U.S. DOJ and FTC allow industry based measures over the 1986-1999 period of the conditional probabilities for eliciting investigations, challenges, prohibitions, court-wins and court-losses: deterrence variables akin to the traditional conditional probabilities from the economics of crime literature. We find the challenge-rate to robustly deter future horizontal (both relative and absolute) merger activity; the investigation-rate to slightly deter relativehorizontal merger activity; the court-loss-rate to moderately affect absolute-horizontal merger activity; and the prohibition-rate and court-win-rate to not significantly deter future horizontal mergers. Accordingly, the conditional probability of eliciting an antitrust challenge (i.e., remedies and prohibitions) involves the strongest deterrence effect from amongst the different merger policy instruments. Terms of use: Documents in

Effective European Antitrust: Does Ec Merger Policy Generate Deterrence?

“…More recently, Baarsma et al () completed a similar survey for the Dutch antitrust authority and confirmed this point regarding the rarity of pro‐competitive mergers being deterred. Additionally, Clougherty and Seldeslachts () find that changes in the tenor of U.S. merger policy affect future horizontal merger activity but do not affect future non‐horizontal merger activity. Since U.S. authorities almost exclusively target horizontal merger activity as potentially anti‐competitive, these results also support the idea that merger control does not deter anti‐competitive mergers.…”

“…Second, we can consider whether it is the horizontal and vertical merger activity considered by the EC to be potentially anti‐competitive which is principally deterred by EC merger policy. Akin to the Clougherty and Seldeslachts () setup, this differentiation takes advantage of the fact that EC officials deem certain horizontal and vertical mergers (i.e., non‐conglomerate activity) to be the population within which anti‐competitive mergers can arise, while the EC does not consider conglomerate merger activity—and certain types of horizontal and vertical merger activity—to generally raise competitive issues. We do, however, face the limitation that we can only identify these differences in clearly pro‐competitive and potentially anti‐competitive merger activity for a subset (2000–2009) of our data sample.…”

“…Our aim is to investigate the deterrence effects involved with the various EC merger‐policy actions; thus, we study the impact of these actions on the proclivity of firms to engage in future merger activity at the industry level. Given that mergers in the European context manifest in wave‐like patterns, we follow the empirical approach of Seldeslachts et al () and Clougherty and Seldeslachts () to hold the merger wave constant in order to elicit deterrence effects. With this empirical approach, holding the merger wave constant allows measuring deterrence via foregone merger activity.…”

“…In particular, Seldeslachts et al () studied the general effectiveness of different merger‐policy instruments across 28 antitrust jurisdictions and found prohibitions to uniquely yield deterrence in the cross‐national context. In a follow‐up study, Clougherty and Seldeslachts () narrowed the scope of analysis to the industry level within arguably the most‐important antitrust jurisdiction by considering the deterrence effects of U.S. merger‐policy instruments. Akin to the approach of Eckbo () and Eckbo and Wier (), Duso et al's () small‐scale study considered whether EC merger‐policy yields deterrence in the form of altered merger proposals in subsequent years; that is, whether the mergers offered up were more likely to harm non‐merging rival firms.…”

“…Akin to the approach of Eckbo () and Eckbo and Wier (), Duso et al's () small‐scale study considered whether EC merger‐policy yields deterrence in the form of altered merger proposals in subsequent years; that is, whether the mergers offered up were more likely to harm non‐merging rival firms. To date, however, there has not been an equivalent industry‐level deterrence study to the comprehensive U.S. study of Clougherty and Seldeslachts () that focuses on the EC: the pre‐eminent European antitrust agency.…”