Friday, May 27, 2016
Steve Salop, Georgetown discusses Modifying Merger Consent Decrees: An Economist Plot to Improve Merger Enforcement Policy.
ABSTRACT: This short article analyzes a proposal that merger consent decrees should include a review and modification provision that would give the agency the ability to petition the court to order further relief if the consent decree fails to preserve or restore competition and protect consumer welfare in a reasonable period of time after the merger is consummated. This review and modification process would help to protect competition and consumers from insufficient, poorly designed or otherwise ineffective consent decrees. It would place more of the risk of failure on the merging parties who claim to the agency that the merger will not harm competition and that the remedy is sufficient to cure the agency’s concerns. The merging firms then would be incentivized to provide more efficient and effective remedies at the HSR stage rather than bear the risk of potentially more costly remedies, disgorgement and other relief later on. This allocation of risk to the merged firm also would help to deter the post-merger exercise of market power achieved or enhanced by the merger. For the same reasons, it also would increase the deterrence of anticompetitive mergers. The article analyzes the structure of the proposal, its goals and benefits, potential relief provisions if modification is required, and potential criticisms.