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The Deterrence Effects of U.S. Merger Policy Instruments

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  • Joseph A. Clougherty

    (University of Illinois at Urbana-Champaign, USA, and CEPR-London)

  • Jo Seldeslachts

    (University of Amsterdam)

Abstract

We estimate the deterrence effects of U.S. merger policy instruments with respect tothe composition and frequency of future merger notifications. Data from the Annual Reports bythe U.S. DOJ and FTC allow industry based measures over the 1986-1999 period of theconditional probabilities for eliciting investigations, challenges, prohibitions, court-wins andcourt-losses: deterrence variables akin to the traditional conditional probabilities from theeconomics 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 relativehorizontalmerger activity; the court-loss-rate to moderately affect absolute-horizontal mergeractivity; and the prohibition-rate and court-win-rate to not significantly deter future horizontalmergers. Accordingly, the conditional probability of eliciting an antitrust challenge (i.e.,remedies and prohibitions) involves the strongest deterrence effect from amongst the differentmerger policy instruments.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 11-095/1.

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Date of creation: 15 Jul 2011
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Handle: RePEc:dgr:uvatin:20110095

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Keywords: antitrust; deterrence; merger policy;

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References

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  1. Mocan, H Naci & Gittings, R Kaj, 2003. "Getting Off Death Row: Commuted Sentences and the Deterrent Effect of Capital Punishment," Journal of Law and Economics, University of Chicago Press, vol. 46(2), pages 453-78, October.
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  8. Donohue III, John J. & Wolfers, Justin, 2006. "Uses and Abuses of Empirical Evidence in the Death Penalty Debate," IZA Discussion Papers 1949, Institute for the Study of Labor (IZA).
  9. Cameron, Samuel, 1988. "The Economics of Crime Deterrence: A Survey of Theory and Evidence," Kyklos, Wiley Blackwell, vol. 41(2), pages 301-23.
  10. Jo Seldeslachts & Joseph A. Clougherty & Pedro Pita Barros, 2009. "Settle for Now but Block for Tomorrow: The Deterrence Effects of Merger Policy Tools," Journal of Law and Economics, University of Chicago Press, vol. 52(3), pages 607-634, 08.
  11. Albert Banal‐Estañol & Paul Heidhues & Rainer Nitsche & Jo Seldeslachts, 2010. "Screening And Merger Activity," Journal of Industrial Economics, Wiley Blackwell, vol. 58(4), pages 794-817, December.
  12. Paul R. Zimmerman, 2006. "The Deterrent Effect of Alternative Execution Methods," American Journal of Economics and Sociology, Wiley Blackwell, vol. 65(4), pages 909-941, October.
  13. Eckbo, B Espen, 1992. " Mergers and the Value of Antitrust Deterrence," Journal of Finance, American Finance Association, vol. 47(3), pages 1005-29, July.
  14. Long, William F & Schramm, Richard & Tollison, Robert D, 1973. "The Economic Determinants of Antitrust Activity," Journal of Law and Economics, University of Chicago Press, vol. 16(2), pages 351-64, October.
  15. Paul R. Zimmerman, 2009. "Statistical Variability and the Deterrent Effect of the Death Penalty," American Law and Economics Review, Oxford University Press, vol. 11(2), pages 370-398.
  16. Golbe, Devra L & White, Lawrence J, 1993. "Catch a Wave: The Time Series Behavior of Mergers," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 493-99, August.
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Cited by:
  1. Wey, Christian & Dertwinkel-Kalt, Markus, 2013. "The Effects of Remedies on Merger Activity in Oligopoly," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79888, Verein für Socialpolitik / German Economic Association.
  2. Andreea Cosnita-Langlais & Lars Sørgard, 2014. "Enforcement vs Deterrence in Merger Control: Can Remedies Lead to Lower Welfare?," EconomiX Working Papers 2014-29, University of Paris West - Nanterre la Défense, EconomiX.
  3. Orley C. Ashenfelter & Daniel Hosken & Matthew C. Weinberg, 2014. "Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers," NBER Working Papers 19939, National Bureau of Economic Research, Inc.

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