The Deterrence Effects of US Merger Policy Instruments

Joseph Clougherty and Jo Seldeslachts

The Journal of Law, Economics, and Organization, 2013, vol. 29, issue 5, 1114-1144

Abstract: We estimate the deterrence effects of US merger policy instruments with respect to the composition and frequency of future merger notifications. Data from the Annual Reports by the US Department of Justice and Federal Trade Commission allow industry-based measures over the 1986--99 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, and the court-loss rate to moderately affect absolute levels of horizontal-merger activity; however, the investigation rate, prohibition rate, and court-win rate do not significantly deter future horizontal mergers. Accordingly, the conditional probability of eliciting an antitrust challenge (i.e. remedies and prohibitions) is unique among the different merger policy instruments as it yields a robust deterrence effect. (JEL L40, L49, K21) The Author 2012. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oup.com, Oxford University Press.

Date: 2013
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Working Paper: The Deterrence Effects of U.S. Merger Policy Instruments (2011)
Working Paper: The Deterrence Effects of U.S. Merger Policy Instruments (2011)
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