John Kwoka's Mergers, Merger Control, and Remedies: A Critical Review

• Author: Michael Vita and F. David Osinski
• Position: Deputy Director for Research & Management, and staff economist, respectively, Bureau of Economics, U.S. Federal Trade Commission
• Pages: 361-388

JOHN KWOKA’S MERGERS, MERGER CONTROL, AND

REMEDIES: A CRITICAL REVIEW

M

ICHAEL

V

ITA

F. D

AVID

O

SINSKI

*

John Kwoka’s 2015 Mergers, Merger Control, and Remedies

1

has received

considerable attention from both antitrust practitioners and academics.

2

The

book’s centerpiece is a meta-analysis of retrospective studies of consummated

mergers, joint ventures, and other horizontal arrangements.

3

Professor Kwoka

creates a database of the estimated price effects reported in these academic

studies, and uses it to address important questions about federal antitrust en-

forcement, such as: Do the agencies successfully identify anticompetitive

mergers? Do merger remedies effectively prevent the creation and exercise of

market power? Have the agencies applied consistent standards over time for

identifying and challenging anticompetitive mergers?

Based on summary statistics generated from his database, Kwoka concludes

that domestic antitrust agencies are excessively tolerant in their merger en-

forcement; that merger remedies are ineffective at mitigating market power;

and that merger enforcement has become increasingly lax over time.

As Federal Trade Commission economists, we appreciate Kwoka’s effort to

distill for a broader audience the wide range of published analyses of antitrust

* Deputy Director for Research & Management, and staff economist, respectively, Bureau of

Economics, U.S. Federal Trade Commission. The views expressed herein are the authors’, not

those of the Federal Trade Commission or any individual Commissioner. We thank Ginger Jin,

Debbie Feinstein, Dan Hosken, Chris Taylor, Lou Silvia, Alison Oldale, Andrew Stivers, Liz

Callison, Tim Deyak, Nathan Wilson, Dave Schmidt, Jon Nathan, Katie MacAdam, and Paul

Pautler for helpful comments. Remaining errors are ours.

1

See J

OHN

K

WOKA

, M

ERGERS

, M

ERGER

C

ONTROL

,

AND

R

EMEDIES

: A R

ETROSPECTIVE

A

NAL-

YSIS OF

U.S. P

OLICY

(2015).

2

See, e.g., Robert A. Skitol, A Harsh Report Card on the Merger Enforcement Process,

A

NTITRUST

S

OURCE

(Feb. 2015), www.americanbar.org/content/dam/aba/publishing/antitrust_

source/feb15_skitol_review_2_11f.pdf.

3

Meta-analysis is a method for systematically combining quantitative findings from multiple

studies to develop a finding that has greater statistical power than any of the individual studies

alone.

361

82 Antitrust Law Journal No. 1 (2018). Copyright 2018 American Bar Association. Reproduced

by permission. All rights reserved. This information or any por tion thereof may not be copied

or disseminated in any form or by any means or downloaded or stored in an electronic

database or retrieval system without the express written consent of the American Bar

Association.

362

A

NTITRUST

L

AW

J

OURNAL

[Vol. 82

enforcement actions. The FTC has a longstanding culture of reflection and

self-assessment; indeed, current or former FTC Bureau of Economics (BE)

staff authored many of the studies in Kwoka’s survey.

4

The FTC recently

released its second major assessment of its merger remedies;

5

the first was

released in 1999.

6

Retrospective studies of consummated mergers have in-

creased the FTC’s antitrust knowledge base, and have helped it improve en-

forcement accuracy by providing valuable insights into when merger policy

has worked, and when it has not.

For example, after a series of unsuccessful hospital merger challenges, FTC

Chairman Timothy Muris launched the Hospital Merger Retrospective Project

in 2002, which contributed to the FTC’s recent successes in challenging harm-

ful hospital mergers.

7

More generally, as Orley Ashenfelter et al. have noted,

prior to the publication of merger retrospectives in the academic literature,

there was virtually no empirical evidence on the actual competitive effects of

horizontal mergers.

8

Retrospective analyses also help the agencies assess and

improve the empirical tools used for prospective merger enforcement.

9

We

4

In addition to studying mergers retrospectively, FTC staff also have studied the effects of

nonmerger activity retrospectively. See B

UREAU OF

C

OMPETITION

& B

UREAU OF

E

CON

., F

ED

.

T

RADE

C

OMM

’

N

, I

MPACT

E

VALUATIONS OF

F

EDERAL

T

RADE

C

OMMISSION

V

ERTICAL

R

ESTRAINTS

C

ASES

(Ronald N. Lafferty et al. eds., 1984).

5

B

UREAU OF

C

OMPETITION

& B

UREAU OF

E

CON

., F

ED

. T

RADE

C

OMM

’

N

, T

HE

FTC’

S

M

ERGER

R

EMEDIES

2006–2012 (2017) [hereinafter FTC’

S

M

ERGER

R

EMEDIES

2006–2012].

6

B

UREAU OF

C

OMPETITION

, F

ED

. T

RADE

C

OMM

’

N

, A S

TUDY OF THE

C

OMMISSION

’

S

D

IVESTI-

TURE

P

ROCESS

(1999).

7

See Deborah Haas-Wilson & Michael Vita, Mergers Between Competing Hospitals: Les-

sons from Retrospective Analyses, 18 I

NT

’

L

J. E

CON

. B

US

. 1 (2011); see also Orley Ashenfelter et

al., Retrospective Analysis of Hospital Mergers, 18 I

NT

’

L

J. E

CON

. B

US

. 5 (2011). Since the

completion of this project, the FTC has enjoyed a string of successes, either successful litigation

or transactions abandoned after the issuance of an FTC complaint. See, e.g., FTC v. Penn St.

Med. Ctr., 838 F.3d 327 (3d Cir. 2016); FTC v. Advocate Health Care Network, 841 F.3d 460

(7th Cir. 2016); Promedica Health Sys., Inc. v. FTC, 749 F.3d 559 (6th Cir. 2014); FTC v. OSF

Healthcare Sys., 852 F. Supp. 2d 1069 (N.D. Ill. 2012); Order Dismissing Complaint, Reading

Health Sys., FTC Docket No. 9353 (Dec. 7, 2012); Decision and Order, Carilion Clinic, FTC

Docket No. 9338 (Nov. 23, 2009); Order Dismissing Complaint, Inova Health Sys. Found., FTC

Docket No. 9326 (June 17, 2008). In Advocate the appellate court cited published FTC hospital

merger retrospectives. Advocate, 841 F.3d. at 470, 472 (citing Steven Tenn, The Price Effects of

Hospital Mergers: A Case Study of the Sutter-Summit Transaction, 18 I

NT

’

L

J. E

CON

. B

US

. 65

(2011); Aileen Thompson, The Effect of Hospital Mergers on Inpatient Prices: A Case Study of

the New Hanover-Cape Fear Transaction, 18 I

NT

’

L

J. E

CON

. B

US

. 91 (2011); Michael G. Vita &

Seth Sacher, The Competitive Effects of Not-for-Profit Hospital Mergers: A Case Study, 49 J.

I

NDUS

. E

CON

. 63 (2001)).

8

Orley Ashenfelter et al., Generating Evidence to Guide Merger Enforcement, 5 C

OMPETI-

TION

P

OL

’

Y

I

NT

’

L

57, 58 (2009).

9

See Craig Peters, Evaluating the Performance of Merger Simulation: Evidence from the

U.S. Airline Industry, 49 J.L. & E

CON

. 627 (2006); Matthew C. Weinberg & Daniel Hosken,

Evidence on the Accuracy of Merger Simulations 95 R

EV

. E

CON

. & S

TAT

. 1584 (2013); Christo-

pher Garmon, The Accuracy of Hospital Merger Screening Methods (Fed. Trade Comm’n,

Working Paper No. 326, 2016).