Monday, June 25, 2012
Guest Post by Jonathan B. Baker & Carl Shapiro
In a book chapter we presented at a 2007 conference and published in 2008, and a subsequent
article responding to criticism, we discussed trends in agency merger enforcement based on enforcement data, a practitioner survey, and public information on selected individual merger investigations. We are writing now to update the enforcement data and analyze its recent trends.
Merger enforcement data must be interpreted with caution, since the mix of deals for which HSR filings are made changes over time, and since no analysis of overall enforcement data can speak to the merits of any specific merger. With respect to the enforcement data, our key statistic was the ratio of agency enforcement actions to HSR filings. We interpreted a low figure as indicating an unanticipated recent decrease in merger enforcement, and a large and sustained dip to a level
below the historical norm as reflecting substantially more lax merger enforcement. We concluded that merger enforcement at DOJ during the first term of the George W. Bush administration and the first half of the second term was surprisingly low, even after accounting for expectations that a new Republican administration would resolve close cases more in favor of permitting mergers than would the prior Democratic administration. The depressed enforcement level at DOJ was comparable to the low rate observed at that same agency during the second term of the Reagan administration. By contrast, we described the FTC enforcement rate during the Bush administration as close to
the historical average during the first term and only somewhat depressed during the second term.
We now have data on merger enforcement during the first two years of the Obama administration, long enough to make a preliminary comparison. (For reasons discussed in our articles, FY 2009 is attributed to the Bush administration, just as FY 2001 was attributed to the Clinton administration.) The table below also updates the Bush second term data to include the last two years. Our article gives two benchmarks: the historical norm, with 1.8% of HSR filings leading to enforcement actions, and severely reduced enforcement at a 0.75% rate.
Bush 1st term (FY 2002-05) 0.75% 1.5%
Bush 2nd term (FY 2006-09) 0.9% 1.25%
Obama 1st term (FY 2010-11)p 1.5% 1.5%
(p = preliminary; based on data from only two years)
These data show a clear change of course at DOJ, from severely lax merger enforcement during the Bush administration to a level during the Obama administration that we described as close to the historical average when previously discussing the Bush-era FTC figures. The higher DOJ enforcement
rate took place notwithstanding expectations that the Obama DOJ would be more enforcement-oriented than was the Bush DOJ.
In contrast, FTC enforcement rates remained on a relatively even keel. The main story here is at the DOJ, where the data provide clear evidence that the Obama administration reinvigorated merger enforcement, as it set out to do.
Disclosure: both authors worked in the government during the Obama administration. Baker was Chief Economist at the Federal Communications Commission from 2009-2011. Shapiro was the Deputy Assistant Attorney General for Economics in the Antitrust Division of the DOJ from 2009-2011 and a Member of the President’s Council of Economic Advisors from 2011-12.