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Merger Effects and Antitrust Enforcement: Evidence from US Consumer Packaged Goods

Author

Listed:
  • Vivek Bhattacharya
  • Gastón Illanes
  • David Stillerman

Abstract

How stringent is antitrust enforcement in the United States? We address this question by documenting the effects of completed mergers in consumer packaged goods and predicting how they would change under stricter antitrust regimes. We find that mergers raise prices by 1.5% and decrease quantities sold by 2.3%, on average. Importantly, there is substantial heterogeneity in these effects: a quarter of mergers decrease prices by at least 5.1%, while another quarter increase prices by at least 5.8%. We embed these estimates into a model of antitrust enforcement and find that agencies block mergers they expect will raise prices by more than 8–9%. Many anti-competitive mergers proceed at this threshold; pro-competitive ones are rarely blocked. Lowering the threshold reduces the probability of allowing anti-competitive mergers without a substantial increase in the probability of blocking pro-competitive ones. The cost is that the number of cases the agencies must challenge could increase drastically.

Suggested Citation

  • Vivek Bhattacharya & Gastón Illanes & David Stillerman, 2023. "Merger Effects and Antitrust Enforcement: Evidence from US Consumer Packaged Goods," NBER Working Papers 31123, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31123
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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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