Breaking up mergers after the fact: Opportunities and problems

Summer 2023
Stack of books on a table

Antitrust authorities in both the United States and Europe have recently shown an increased interest in reviewing past mergers with the objective of possibly requiring mergers to be undone if they turned out to be anticompetitive. In this article, the authors reach five main conclusions.

First, analyzing the effects of past mergers is unlikely to be straightforward because it will be difficult to disentangle the competitive effects of a merger from other factors in the markets served by the merged firms.

Second, even divestitures that were required before mergers had been consummated were complicated to bring about and there is evidence that they have not always been successful in achieving their intended effects.

Third, divestitures that are imposed after a merger has been consummated will be even more difficult to accomplish and, for that reason, are likely to require even more stringent conditions in order to realize their competitive objectives.

Fourth, merged firms that fear that the government may attempt to undo their mergers in the future may engage in manipulative behavior that (1) attempts to mask any anticompetitive effects and (2) integrate their activities beyond the level that would be dictated by efficiencies in order to make future divestitures more difficult.

Finally, requiring divestitures where mergers have occurred in the past may be desirable even if they cannot restore the competitive situation that existed prior to the mergers if, as a result, the competitive situation is significantly improved.

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