Selected Economic Analysis at the Antitrust Division: The Year in Review

Of the many activitiesof the Antitrust Division of theU.S. Department of Justice, we havesummarized some that raise interestingeconomic issues. We describe recentimprovements in the methodology to beused in ``coordinated effects' analysisof mergers. We also discuss four casesbrought by the DOJ that raise issues ofmarket definition, the influence ofcommon partial ownership of competitors,and the effects of fringe suppliers inconstraining collusion by large firms.     

Staples and Office Depot: An Event-Probability Case Study

Investors in financial markets bet their dollars on whether amerger will raise or lower prices. Below, we apply an event-probability methodology to the proposed merger between Staples and Office Depot, which was challenged by the FTC and eventually withdrawn. In addition to a time-series regression,we also look at the effect of the merger in specific event windows. We find highlysignificant returns to the only rival firm in the relevant market. We estimate theprice effect of the merger and find it highly consistent with independent estimates.     

Commitment to Competition: An Assessment of Antitrust Agency Budgets since 1970

In these remarks to the Industrial Organization Society, I discuss the adequacy of antitrust enforcement resources in the U.S. Relevant resources are measured by the competition budgets of the Justice Department and the Federal Trade Commission. Since 1970 these have been influenced by the overall economy, its changing structure, and politics, but they have not kept up with the pace of mergers or other measures of the need for antitrust. Thus at present, the resources devoted to antitrust fall well short of what is required for continued vigilance over our growing and changing economy.     

Delusions Regarding the Proper Role of Markets and Antitrust Policy

William Curran and Donald Wellington have criticized capitalism,neoclassical economics and antitrust policy. This article defendscapitalistic institutions against both the strong forms ofsocialism as practiced in the former Soviet Union and againstits milder forms as practiced in the welfare states of Europe.The article endorses some of Curran's and Wellington's concernsabout neoclassical economics, but recommends that neoclassicaleconomics be adapted to make it more useful for scientificresearch rather than abandoned outright. Some suggestions areoffered in this direction. The article totally rejects the notionthat antitrust policy can be a tool for correcting the ills ofcapitalism as Curran and Wellington see them, and argues that thegoal of antitrust policy should be to improve capitalism not todestroy it.     

Competition policy, collusion, and tacit collusion

In this paper, I pursue three goals. The first is to model collusion in a way that is distinct from noncooperative collusion. The second and third are to develop a particular specification of a standard model of noncooperative collusion that permits explicit solution for equilibrium outputs and reversion thresholds and to extend this analysis to allow for a deterrence-based competition policy that investigates conduct based on observed high prices (investigation thresholds).     

Is Netflix a threat to the cable TV industry? Evidence from Brazil

In recent years, the Brazilian cable TV industry has experienced a sharp downturn. In parallel, the over-the-top platform Netflix gained popularity and Brazil has become one of its biggest markets. The objective of this paper is to investigate the competitive effects of Netflix's entry on the incumbent cable TV industry. We explore the regional variability of Netflix's popularity (measured by Google Trends) and combined this information with official data of the cable TV market. Using a two-way fixed effects estimator with state-month observations (covering the period of 2012–2019), we showed that the increase in one standard deviation in Netflix popularity is associated with a 3.62% reduction in the density of cable TV subscribers and with a 19.69% reduction in the number of small firms that operate cable TV.     

Paths to Common Ground? A Rejoinder to Dewey's Response

While subsequent discussion in this Review has failed to reconcile the merger policies proposed by Dewey and Keyes, it has suggested that they are not as far apart as they seemed at first reading. It now appears that both writers advocate a serious critical consideration of the efficiencies claims advanced by proponents of otherwise unacceptable mergers. Moreover, there may be a possibility that Dewey's special large-firm merger control could be defended on grounds which would not conflict with Keyes' proposal but would simply complement it.     

Predicting Household Switching Behavior and Switching Costs at Depository Institutions

This paper uses new survey data to investigate the covariates of self-reported switching costs and switching behavior by deposit account holders. Factors affecting geographic mobility appear to be most important in explaining the duration of deposit relationships. Both younger and older respondents are more likely than others to be at their first bank ever, suggesting a cohort effect in deposit relationships. Households reporting switching costs, net of the benefits from switching, are less likely than others to have stayed with a bank for prices or customer service, suggesting that switching costs may decrease price sensitivity. Switching costs appear more severe for households with high income or education and for households with very low income or minority ethnicity. These findings imply that banking markets characterized by such households may present greater entry costs for new firms.     

Measuring the Extent of Structural Remedy in Section 7 Settlements: Was the US DOJ Successful in the 1990s?

This paper suggests an innovative measure of structural relief obtained in a typical Section 7 settlement. The fraction of competitive overlap subject to divestiture as a condition of the settlement is modeled as a function of merger-specific efficiencies, the proportion of the deal held “hostage” to antitrust review, the merger’s anticompetitive potential, and other factors. The model is applied to data on 86 recent Justice Department cases covering the period 1990–2003 and to the subsample of 1990s cases. All data are collected from publicly available documents only. The government is found to secure larger divestitures when the cost to the acquirer of delaying the settlement is high. The resulting estimates are used to predict several out-of-sample observations. I would like to thank the General Editor and two anonymous referees for many helpful suggestions on earlier drafts of this paper. The remaining errors are mine.     

Objectives, topics and methods in industrial organization during the nineties: Results from a survey

We conducted a survey among 114 experts on industrial organization regarding their opinions on the way markets work, on the proper role of competition and industrial policy, and on the methods which should be used to analyse industrial markets. The experts assessed the importance of research topics and methods during the last year and their probable development in the future. The sample appears to provide a valid representation of European experts, the response pattern does not seem to depend on the personal characteristics of the respondents.     

Fifty Years of U.K. Competition Policy

The first statute of modern times in Britaindealing with competition policy was passed 50years ago. Since then the policy has beenextended and changed in a number of ways butusually in a piecemeal fashion. The 50thanniversary coincides with probably the greatestchange in U.K. policy, embodied in the 1998Competition Act. The paper reviews the changingscope of the policy, its effects and weaknesses.It also considers the likely future impact ofthe new Act.     

Imperfect competition law enforcement

Competition policy is a subject of often heated debate. Competition authorities, seeking to prevent or battle anticompetitive acts in complex cases to the best of their abilities, regularly find themselves advised by rival economic theories and disputed empirical analyses. As a consequence, there is a real possibility that they may occasionally err, missing true violations of competition law or finding firms liable that actually had no other intentions than good competition. In this paper, possible consequences of such imperfect competition law enforcement on firm strategies are considered. In a simple model of collusion, it is found that the incidence of anti-competitive behavior increases in both types of enforcement errors: Type II errors decrease expected fines, while Type I errors encourage industries to collude precautionary when they face the risk of a false conviction. Hence, fallible antitrust enforcement may stifle genuine competition, thus stimulating the very behavior competition policy is meant to deter. When enforcement errors are non-negligible, competition authorities run the risk of being over-zealous, in the sense that welfare is best served by an authority that is selective and conscientious in its targeting of alleged anticompetitive acts.     

垄断行业的效率、改革与规制重构——转型经济中的经验与教训研讨会观点综述

行政垄断的判定与垄断程度的测度需要一个完善的标准。实证表明,行政垄断造成了巨大的经济效率损失,而消除行政垄断只能分步骤有序进行。竞争政策的设计应结合本国国情,竞争政策的目标也应该是多元的,同时需要构建完善的反垄断体系。垄断行业的改革应根据行业自身特点与市场空间来确定其市场化的程度和规制的程度,需要系统设计改革时序,重构并建立科学的规制体系。