The Federal Trade Commission and the Department of Justice’s Antitrust Division launched a joint public inquiry to solicit comments from the public on merger enforcement.
The Federal Trade Commission and the Department of Justice’s Antitrust Division (“the agencies”) launched a joint public inquiry to solicit comments from the public on merger enforcement. By seeking comments on developments in the modern economy and new evidence of mergers’ effects on competition, the agencies are hoping to inform potential revisions to the merger guidelines to strengthen enforcement against illegal mergers.
Cornerstone Research staff and affiliated experts submitted several comments during the inquiry period, which ran from January to April 2022.
These comments include:
Comment on the January 2022 DOJ and FTC RFI on Merger Enforcement
John Asker of the University of California, Los Angeles; Nathan Miller of Georgetown University; Aviv Nevo of the University of Pennsylvania; Kostis Hatzitaskos, Bob Majure, and Ana McDowall of Cornerstone Research
The authors draw from their collective merger review experience to provide input into the process of updating the Horizontal Merger Guidelines (HMG) and potentially replacing the Vertical Merger Guidelines. The authors note that any updates should be careful not to undermine the Guidelines’ credibility. For example, the 2010 HMG have largely stood the test of time, with mainstream academic literature not supporting large deviations. Lastly, the authors provide specific areas where updates could make enforcement more effective.
Comment on the January 2022 DOJ and FTC RFI on Merger Enforcement: Issues Related to Failure and Exiting Assets
Ceren Canal Aruoba and Greg Eastman of Cornerstone Research
The authors discuss the current approach to failing firms and the gap between the guidelines and factors considered in past cases. They outline questions the agencies could use to illustrate the types of factors to consider as criteria for identifying failing firms.
Comment on the January 2022 DOJ and FTC RFI on Merger Enforcement: Issues Related to Digital Markets
Lesley Chiou of Occidental College; Jeffery Prince of Indiana University; Nathaniel Hipsman and Sachin Sancheti of Cornerstone Research
The authors question the agencies’ assumptions about how digital markets are unique. In response, they discuss how each economic issue attributed to digital markets by the agencies has been studied in non-digital contexts.
A Comment on Labor Market Definition
Justin McCrary of Columbia University; Kavan Kucko, Bryan Ricchetti, and Rainer Schwabe of Cornerstone Research
Responding to the agencies’ request for comments on issues specific to “monopsony power and labor markets,” the authors discuss relevant principles of labor market definition. In addition, they highlight the importance of accounting for non-wage compensation and discuss types of information and evidence that may be available when analyzing a labor market.
DOJ and FTC RFI on Merger Enforcement: Considerations with Venture-Backed M&A Targets
Brendan Rudolph, Ravi Sinha, and Alex Vasaly of Cornerstone Research
The authors discuss “killer acquisitions” (acquisitions of a nascent or potential competitor by a large, incumbent firm), noting that the targets in these acquisitions—particularly in the tech industry—are often venture-backed startups. The authors review relevant academic literature and provide recent contextual data on venture capital activity in the United States. In addition, they outline the effects on future innovation that would follow from any implicit presumption that acquisitions of venture-backed startups by large, incumbent tech platform firms are anticompetitive.
Experts affiliated with Cornerstone Research submitted the following comments as well:
Collusion, Mergers, and Related Antitrust Issues
John Asker of the University of California, Los Angeles
Professor Asker and his coauthor submitted a synthesis of much of the recent academic economic research on mergers and collusion. Attaching their recent chapter published in the Handbook of Industrial Organization Volume 4, the authors discuss research on the impact of enforcement institutions on mergers. They also describe theoretical work on the selection of which mergers get proposed to antitrust agencies and optimal policy in the face of that selection.
Submission to DOJ-FTC Merger Guidelines RFI: Entry
Nathan Miller of Georgetown University
In response to the agencies’ questions on “Barriers to Entry and Growth,” Professor Miller discusses the treatment of entry and repositioning in merger review.
Submission to DOJ-FTC Merger Guidelines RFI: Price HHI Regressions
Nathan Miller of Georgetown University
In response to the agencies’ question of how to modernize enforcement of the antitrust laws regarding mergers, Professor Miller discusses one particular type of econometric evidence—regressions of price on the HHI—that frequently can be misleading about the competitive effects of mergers.
Response to the ‘Request for Information on Merger Enforcement
Andrew Sweeting of the University of Maryland
Professor Sweeting, who served as Director of the Bureau of Economics at the FTC in 2020, addresses the types of guidance that may be useful, and the specific role of the Guidelines. He describes the strengths and limitations of the discussion of incentives in the 2010 Horizontal Merger Guidelines and the 2020 Vertical Merger Guidelines. He also discusses efficiencies and pass-through of efficiencies, and the treatment of entry as a possibility that may reduce concerns about anticompetitive effects.