Mergers, Merger Control, and Remedies: A Retrospective Analysis of U.S. Policy

283 Pages·2014·6.457 MB·English

by  John E. Kwoka Jr.

Mergers, Merger Control, and Remedies

Mergers, Merger Control, and Remedies
A Retrospective Analysis of U.S. Policy
John Kwoka
with contributions by Daniel Greenfield and Chengyan Gu
The MIT Press
Cambridge, Massachusetts
London, England
© 2015 Massachusetts Institute of Technology

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Library of Congress Cataloging-in-Publication Data
Kwoka, John E.
Mergers, merger control, and remedies : a retrospective analysis of U.S. policy / John
Kwoka.
pages cm
Includes bibliographical references and index.
ISBN 978-0-262-02848-6 (hardcover : alk. paper) 1. Consolidation and merger of
corporations — United States. 2. Consolidation and merger of corporations —
Government policy — United States. 3. Antitrust law — United States. I. Title.
HD2746.5.K88 2015
338.8’30973 — dc23
2014019591

10 9 8 7 6 5 4 3 2 1
To Zol í n

Contents
Preface ix
1 Introduction 1
2 Mergers and Merger Policy in the United States: An
Overview 9
3 Evaluating Merger Outcomes 39
4 Guide to Merger Analysis Using Difference in
Differences 57
Daniel Greenfield
5 Merger Retrospectives: Two Studies 71
6 Mergers and Product Prices 83
7 Merger Policy and Remedies 105
8 Merger Remedies, Structural and Conduct 127
9 Retrospective Studies of Groups of
Mergers 143
10 Summary of Findings and Concluding
Observations 153
Appendix I: Summaries of Individually Studied Mergers 161
Chengyan Gu
viii
Appendix II: Summaries of Group Merger Studies 219
Chengyan Gu
Notes 239
References 249
Index 259
Preface
One hundred years ago the United States adopted the first modern-day
statute seeking to prevent the growth of excessive economic power
through mergers and acquisitions. The Clayton Anti-Trust Act of 1914
prohibited any company from acquiring the stock of another company
“ where the effect of such acquisition may be to substantially lessen
competition. ” Passage of the Clayton Act was prompted by a spate of
huge mergers in the preceding decades, mergers that fell outside the
bounds of the earlier Sherman Act ’s prohibitions on price fixing and
monopoly practices. These megamergers created such familiar and
enduring names as American Tobacco, DuPont, Eastman Kodak,
General Electric, International Harvester, Standard Oil, and U.S. Steel,
companies with enormous presence in manufacturing and in the U.S.
economy as a whole throughout the twentieth century.
Forty years after the passage of the Clayton Act, the scope of that
statute was expanded to encompass asset as well as stock acquisitions,
thereby breathing life into a broad policy of merger control. Since that
time mergers have changed dramatically both in numbers — with dis-
tinct “ waves” in their frequency — and in character, with shifting pat-
terns among horizontal, vertical, and conglomerate mergers. Policy has
undergone a profound transformation as well, from the stringent stan-
dards that produced enforcement and judicial decisions such as U nited
States v. Von ’ s Grocery 1 in 1966 to the current climate that, for example,
has approved mergers consolidating much of the domestic airline
industry.
What has remained largely unchanged throughout these decades,
however, has been the relative dearth of detailed evaluations of the
effects of mergers and of the effectiveness of merger policy. There are
a number of reasons for this, as this book discusses, but the result is
clear: our understanding of mergers is based on fragmentary evidence,