The Deterrence Effects of U.S. Merger Policy Instruments

We estimate the deterrence effects of U.S. merger policy instruments with respect tothe composition and frequency of future merger notifications. Data from the Annual Reports bythe U.S. DOJ and FTC allow industry based measures over the 1986-1999 period of theconditional probabilities for eliciting investigations, challenges, prohibitions, court-wins andcourt-losses: deterrence variables akin to the traditional conditional probabilities from theeconomics of crime literature. We find the challenge-rate to robustly deter future horizontal(both relative and absolute) merger activity; the investigation-rate to slightly deter relativehorizontalmerger activity; the court-loss-rate to moderately affect absolute-horizontal mergeractivity; and the prohibition-rate and court-win-rate to not significantly deter future horizontalmergers. Accordingly, the conditional probability of eliciting an antitrust challenge (i.e.,remedies and prohibitions) involves the strongest deterrence effect from amongst the differentmerger policy instruments.