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The Deterrence Effects of US Merger Policy Instruments

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  • Joseph A. Clougherty
  • Jo Seldeslachts

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.

Suggested Citation

  • Joseph A. Clougherty & Jo Seldeslachts, 2013. "The Deterrence Effects of US Merger Policy Instruments," Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(5), pages 1114-1144, October.
  • Handle: RePEc:oup:jleorg:v:29:y:2013:i:5:p:1114-1144
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    Cited by:

    1. Joseph A. Clougherty & Tomaso Duso & Miyu Lee & Jo Seldeslachts, 2016. "Effective European Antitrust: Does Ec Merger Policy Generate Deterrence?," Economic Inquiry, Western Economic Association International, vol. 54(4), pages 1884-1903, October.
    2. Lars Sorgard & Andreea Cosnita-Langlais, 2013. "Enforcement vs Deterrence in Merger Control: Can Remedies Lead to Lower Welfare?," Post-Print hal-01668416, HAL.
    3. Maria Rosaria Alfano & Anna Laura Baraldi & Erasmo Papagni, 2015. "The Effect of the Proportionality Degree of Electoral Systems on Corruption," EERI Research Paper Series EERI RP 2015/03, Economics and Econometrics Research Institute (EERI), Brussels.
    4. Tomaso Duso & Jo Seldeslachts & Florian Szücs, 2017. "The Impact of Competition Policy Enforcement on the Functioning of EU Energy Markets," Discussion Papers of DIW Berlin 1674, DIW Berlin, German Institute for Economic Research.
    5. Kenneth A. Younge & Tony W. Tong & Lee Fleming, 2015. "How anticipated employee mobility affects acquisition likelihood: Evidence from a natural experiment," Strategic Management Journal, Wiley Blackwell, vol. 36(5), pages 686-708, May.
    6. Maria Rosaria Alfano & Anna Laura Baraldi & Claudia Cantabene, 2014. "The Effect of the Decentralization Degree on Corruption: A New Interpretation," EERI Research Paper Series EERI RP 2014/10, Economics and Econometrics Research Institute (EERI), Brussels.
    7. Orley Ashenfelter & Daniel Hosken & Matthew Weinberg, 2014. "Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers," Journal of Law and Economics, University of Chicago Press, vol. 57(S3), pages 67-100.
    8. Dertwinkel-Kalt, Markus & Wey, Christian, 2014. "Remedies vs. Extreme Options in Merger Control," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100397, Verein für Socialpolitik / German Economic Association.
    9. Dertwinkel-Kalt, Markus & Wey, Christian, 2012. "The effects of remedies on merger activity in oligopoly," DICE Discussion Papers 81, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    10. Redkina, Anastasia & Lagodyuk, Ekaterina, 2016. "The deterrent effect of Russian control of mergers: An Empirical Study," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 79-104, February.
    11. Markus Dertwinkel-Kalt & Christian Wey, 2016. "Merger Remedies in Oligopoly under a Consumer Welfare Standard," Journal of Law, Economics, and Organization, Oxford University Press, vol. 32(1), pages 150-179.

    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L49 - Industrial Organization - - Antitrust Issues and Policies - - - Other

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