Tuesday, June 2, 2009

More on Obama's Possible Impact on Competition

Earlier I suggested that, even if the Obama Administration was significantly more anti-merger than Bush's, the impact on efficiency and the consumer might be minimal because mergers are substitutable across time.

This intertemporal substitution effect operates less regarding DOJ regulation of business' pricing and marketing policies.

Professor Priest in today's WSJ suggested another reason Obama might have little impact on anti-trust policy: (he claims) anti-trust law is ultimately determined by the Supreme Court, and (even with a couple of Obama appointments) the Supreme Court will not completely overturn its precedents.

Of course (assuming again that the Obama Administration makes a genuine change), businesses will have to spend more on legal fees and economic experts to continue pursue some of the practices they did under Bush. Some of those businesses will decide not to fight DOJ (due to the legal expense) and instead just change their practices. Other business will fight, or credibly threaten to fight, DOJ all the way to the Supreme Court.

Presumably the former cases would involve practices that are less valuable in terms of enhancing efficiency or stifling competition (that's why they are outweighed by legal fees) whereas the latter cases involve the practices that matter the most. This kind of selection bias suggests that the most valuable practices disapproved by the Obama Administration but approved by the Supreme Court will survive.

Commenters -- what do you think -- is anti-trust really in for a big change?

1 comment:

jb said...

Let us hope not.

As we come out of this recession it is prime time for businesses to vulture through the scrap heap and pick up core assets.

Obstructing this change will stifle growth and reduce our long run equilibrium.