Wednesday, May 13, 2009

Antitrust Overblown -- At Least the Merger Part

This week the Obama administration announced that they would strengthen antitrust rules, as compared to the Bush Administration. I am always skeptical when one party claims to have dramatically different policy than the other, but maybe this promise is credible. So what?

The Obama years would have fewer mergers. Obama will leave office eventually, at which point there would be many more mergers. Presumably a bunch of mergers occurred at the end of the Bush Administration in anticipation of tougher enforcement by Obama.

I do not think that team Obama will go so far as to break up companies that were merged under Bush, so its really only a question of how much it matters that two corporations have to operate separately for a while (waiting for Obama to leave) or that two corporations were merged prematurely as the Bush administration ended.

In case you think the typical merger would enhance efficiency: is it a big deal to postpone the efficiency gain for a few years? What about the efficiency gains that happened early as a result of mergers rushed through before Bush was done?

In case you think that the typical merger would be anti-competitive: how much does the consumer gain if the anti-competitive effect is postponed a few years? What about the anti-competitive mergers that happened early in a rush before Bush was done?

Timing is probably not so crucial to mergers. The interesting thing about the Obama anti-trust announcement is what it reveals about his plans to differentiate HIS (political) product and extract rents from HIS consumers (the citizens) ;).

[NOTE: Other aspects of anti-trust policy, such as the regulation of marketing practices, are another story because many of the prohibited practices create on-going efficiency benefits and/or anti-competitive costs]

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