Do Court Decisions Drive the Federal Trade Commission Enforcement Policy on Merger Settlements?

Abstract

Most mergers filed at the enforcement agencies are conglomerate in nature with only minor horizontal overlaps. An enforcement agency may challenge the merger, if any overlap is believed to be adversely affected by the transaction. While the merging firm is entitled to a hearing in federal court, the delay would impose additional costs, thereby giving the enforcement agency the ability to hold up the bulk of the transaction, pending resolution. Hence, the agency's actions are not fully checked by the threat of litigation. This paper explores whether the FTC's decisions to challenge conglomerate transactions that could feasibly settle differ from the controlling case law. We find that the representative enforcement regimes are remarkably similar, though the FTC is more accepting of efficiencies arguments, while the court considers buyer sophistication as a mitigating factor. In aggregate, the differences generally cancel out leaving comparable levels of enforcement. In depth analysis identifies some minor enforcement differences, almost none of which are statistically significant.

Keywords: Mergers, Competition Policy, Antitrust, Federal Trade Commission, Courts, Decomposition, Merger Guidelines, Oaxaca decomposition

JEL Classification: K21, L22, L40, l49, l51