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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," The 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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    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, 2016. "Effect of the proportionality degree of electoral systems on corruption," Environment and Planning C, , vol. 34(8), pages 1895-1916, December.
    4. Duso, Tomaso & Seldeslachts, Jo & Szucs, Florian, 2019. "The Impact of Competition Policy Enforcement on the Functioning of EU Energy Markets," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 40(01), pages 97-120.
    5. Joseph A. Clougherty & Nan Zhang, 0. "Foreign investor reactions to risk and uncertainty in antitrust: U.S. merger policy investigations and the deterrence of foreign acquirer presence," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 0, pages 1-25.
    6. 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.
    7. Clougherty, Joseph A. & Duso, Tomaso & Lee, Miyu & Seldeslachts, Jo, 2016. "Effective European Antitrust : Does EC Merger Policy Generate Deterrence?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 54(4), pages 1884-1903.
    8. Andreea Cosnita‐Langlais & Jean‐Philippe Tropeano, 2023. "Merger selection, evidence provision, and the timing of merger control," Bulletin of Economic Research, Wiley Blackwell, vol. 75(1), pages 209-222, January.
    9. de Bodt, Eric & Cousin, Jean-Gabriel & Officer, Micah S. & Roll, Richard, 2024. "The deterrence effect of M&A regulatory enforcements," Journal of Corporate Finance, Elsevier, vol. 85(C).
    10. Thomas G. Wollmann, 2020. "How to Get Away with Merger: Stealth Consolidation and Its Effects on US Healthcare," NBER Working Papers 27274, National Bureau of Economic Research, Inc.
    11. Dertwinkel-Kalt, Markus & Wey, Christian, 2012. "The effects of remedies on merger activity in oligopoly," DICE Discussion Papers 81, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    12. Redkina, Anastasia (Редькина, Анастасия) & Lagodyuk, Ekaterina (Лагодюк, Екатерина), 2016. "The deterrent effect of Russian control of mergers: An Empirical Study [Сдерживающие Эффекты Российского Контроля Слияний: Эмпирическое Исследование]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 79-104, February.
    13. Joseph A. Clougherty & Nan Zhang, 2021. "Foreign investor reactions to risk and uncertainty in antitrust: U.S. merger policy investigations and the deterrence of foreign acquirer presence," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(3), pages 454-478, April.
    14. Hüschelrath, Kai, 2009. "Methodologische Grundlagen einer Evaluation von Wettbewerbspolitik," ZEW Discussion Papers 09-084, ZEW - Leibniz Centre for European Economic Research.
    15. Cosnita-Langlais Andreea & Sørgard Lars, 2018. "Enforcement and Deterrence in Merger Control: The Case of Merger Remedies," Review of Law & Economics, De Gruyter, vol. 14(3), pages 1-22, November.
    16. Affeldt, Pauline & Duso, Tomaso & Szücs, Florian, 2021. "25 years of European merger control," International Journal of Industrial Organization, Elsevier, vol. 76(C).
    17. Clougherty, Joseph A. & Zhang, Nan, 2023. "Antitrust policy and inward FDI: The impact of policy risk and uncertainty on U.S. inward-FDI flows," International Business Review, Elsevier, vol. 32(4).
    18. Younge, Kenneth A. & Tong, Tony W., 2018. "Competitive pressure on the rate and scope of innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 150(C), pages 162-181.
    19. Markus Dertwinkel-Kalt & Christian Wey, 2016. "Merger Remedies in Oligopoly under a Consumer Welfare Standard," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 32(1), pages 150-179.
    20. 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.
    21. 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.
    22. Stephen Davies & Peter Ormosi, 2013. "The Impact of Competition Policy: What are the Known Unknowns?," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2013-07, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    23. Dertwinkel-Kalt, Markus & Wey, Christian, 2014. "Remedies vs. Extreme Options in Merger Control," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100397, Verein für Socialpolitik / German Economic Association.
    24. Fidrmuc, Jana P. & Roosenboom, Peter & Zhang, Eden Quxian, 2018. "Antitrust merger review costs and acquirer lobbying," Journal of Corporate Finance, Elsevier, vol. 51(C), pages 72-97.
    25. Elena Chernova & Svetlana Razmanova, 2018. "Development of Competitive Environment in the Oil Market of Russian Federation: Empirical Analysis," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(2), pages 547-561.

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    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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