Merger Effects and Antitrust Enforcement: Evidence from US Consumer Packaged Goods
How stringent is antitrust enforcement in the United States? We address this question by documenting the effects of completed mergers in consumer packaged goods and predicting how they would change under stricter antitrust regimes. We find that mergers raise prices by 1.5% and decrease quantities sold by 2.3%, on average. Importantly, there is substantial heterogeneity in these effects: a quarter of mergers decrease prices by at least 5.1%, while another quarter increase prices by at least 5.8%. We embed these estimates into a model of antitrust enforcement and find that agencies block mergers they expect will raise prices by more than 8–9%. Many anti-competitive mergers proceed at this threshold; pro-competitive ones are rarely blocked. Lowering the threshold reduces the probability of allowing anti-competitive mergers without a substantial increase in the probability of blocking pro-competitive ones. The cost is that the number of cases the agencies must challenge could increase drastically.
Non-Technical Summaries
- Mergers can increase prices if the merging parties gain market power due to the deal. They can decrease prices if the union induces cost...