Today the AAI released a new paper by John Kwoka, AAI Advisor and Northeastern University‘s Neal F. Finnegan Distinguished Professor of Economics, Reviving Merger Control: A Comprehensive Plan for Reforming Policy and Practice.
Kwoka’s new analysis—which builds on his previous, widely cited and discussed analyses—begins by framing the different view of competition and antitrust that has recently burst upon the scene. A considerable number of economists, policymakers, and others have come to argue that antitrust policy has in fact become too permissive, in particular allowing mergers and other practices that have resulted in significant increases in concentration and considerable harm to consumers. Not all observers are convinced, of course, and the evidence continues to be debated. But the totality of evidence makes a persuasive case that concentration in the economy has risen, that competitive forces have been blunted, and that policy failures have contributed significantly to those problems.
Kwoka’s analysis begins where that discussion leaves off. It sets out a comprehensive program of policy reforms necessary to remedy past weaknesses and failures and to restore the vitality of antitrust in protecting competition in the economy. While there have already been various specific reforms proposed and discussed in conferences, white papers, and even some legislation, the reform program proposed in Kwoka’s paper is different in three respects.
First, rather than advancing one or two reform proposals, it is a fully comprehensive program. It consists of a number of specific substantive reforms as well as some procedural reforms—a total of ten specific measures. Second, while each reform has merit, the package is an integral whole rather than a menu of alternatives among which to choose. The problems of current merger control policy are numerous, so that the necessary reforms are equally numerous and should be viewed as an integral whole. Finally, the package of proposals is rooted in economic theory and empirical evidence. The proposals are not simply interesting or seemingly sensible ideas. Rather, they follow from modern economic understanding of market competition, and certainly past experience, all of which are fully documented in support of the proposals.
The common thread that runs through the proposals is that, over time, merger control policy and practice have moved away from the central mission of preserving competition in all the meanings of that term, and instead narrowly focused on certain types of mergers, certain types of adverse outcomes, and certain resolutions of competitive problems. This has resulted in tolerance of a large number of mergers that have proven to be anticompetitive, with adverse effects on consumers and businesses alike. This paper presents specific proposals, grounded in the evidence, necessary to restore merger control.