Measuring the Extent of Structural Remedy in Section 7 Settlements: Was the US DOJ Successful in the 1990s?

Measuring the Extent of Structural Remedy in Section 7 Settlements: Was the US DOJ Successful in... This paper suggests an innovative measure of structural relief obtained in a typical Section 7 settlement. The fraction of competitive overlap subject to divestiture as a condition of the settlement is modeled as a function of merger-specific efficiencies, the proportion of the deal held “hostage” to antitrust review, the merger’s anticompetitive potential, and other factors. The model is applied to data on 86 recent Justice Department cases covering the period 1990–2003 and to the subsample of 1990s cases. All data are collected from publicly available documents only. The government is found to secure larger divestitures when the cost to the acquirer of delaying the settlement is high. The resulting estimates are used to predict several out-of-sample observations. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Measuring the Extent of Structural Remedy in Section 7 Settlements: Was the US DOJ Successful in the 1990s?

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Publisher
Kluwer Academic Publishers-Plenum Publishers
Copyright
Copyright © 2006 by Springer Science+Business Media, LLC
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-006-9118-4
Publisher site
See Article on Publisher Site

Abstract

This paper suggests an innovative measure of structural relief obtained in a typical Section 7 settlement. The fraction of competitive overlap subject to divestiture as a condition of the settlement is modeled as a function of merger-specific efficiencies, the proportion of the deal held “hostage” to antitrust review, the merger’s anticompetitive potential, and other factors. The model is applied to data on 86 recent Justice Department cases covering the period 1990–2003 and to the subsample of 1990s cases. All data are collected from publicly available documents only. The government is found to secure larger divestitures when the cost to the acquirer of delaying the settlement is high. The resulting estimates are used to predict several out-of-sample observations.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 12, 2006

References

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