Antimerger Policy Under the Hart-Scott-Rodino Act: A Reexamination of the Market Power Hypothesis

Abstract

Enforcement powers granted under the 1978 Hart-Scott-Rodino Antitrust Improvements Act were intended to enhance the antitrust agencies' ability to select truly anticompetitive mergers for prosecution. For example, the HSR Act imposes automatic delays on proposed mergers, so that the agencies have time to consider the mergers' competitive effects before they are completed. Also, it provides the agencies with the legal right to compel industry participants to reveal merger-related information during precomplaint investigations. Earlier studies by Eckbo (1983) and Stillman (1983) show that the HSR Act addressed a genuine problem: they conclude that the challenged horizontal mergers in their samples, which cover the 1963-78 period, were not anticompetitive. In this paper we test the proposition that the HSR Act has in fact produced a significant improvement in the agencies' case selection record. We reject this proposition and conclude instead that he merger cases in our sample that were filed after 1978 were mounted against mergers that apparently would not have harmed competition.

Keywords: Mergers, antitrust, market power, collusion, rival firms, industry rents

JEL Classification: D43, G34, G38, K21, L16, L41