We Are Not Just Going to Stand Here, We Are Going to Do Something!

Cite this Article
Joshua D. Wright, We Are Not Just Going to Stand Here, We Are Going to Do Something!, Truth on the Market (September 28, 2007), https://truthonthemarket.com/2007/09/28/we-are-not-just-going-to-stand-here-we-are-going-to-do-something/

That seems to be the message of presidential candidate/ Senator Barak Obama’s response to the American Antitrust Institute’s questions on antitrust (HT: Antitrust Review). First off, kudos to Obama for stating his position on antitrust in a public forum. I hope the rest of the candidates will do the same. Do go read the whole thing.  The thrust of the message appears to be that an Obama administration would be more active than the Bush administration and that more is better:

Regrettably, the current administration has what may be the weakest record of antitrust enforcement of any administration in the last half century. Between 1996 and 2000, the FTC and DOJ together challenged on average more than 70 mergers per year on the grounds that they would harm consumer welfare. In contrast, between 2001 and 2006, the FTC and DOJ on average only challenged 33. And in seven years, the Bush Justice Department has not brought a single monopolization case.

The consequences of lax enforcement for consumers are clear. Take health care, for example. There have been over 400 health care mergers in the last 10 years. The American Medical Association reports that 95% of insurance markets in the United States are now highly concentrated and the number of insurers has fallen by just under 20% since 2000. These changes were supposed to make the industry more efficient, but instead premiums have skyrocketed, increasing over 87 percent over the past six years. As president, I will direct my administration to reinvigorate antitrust enforcement. It will step up review of merger activity and take effective action to stop or restructure those mergers that are likely to harm consumer welfare, while quickly clearing those that do not.

I am not so sure I’m convinced that level of activity is a good proxy for consumer welfare.  There exist both Type I and Type II enforcement errors.  It may be a bit simplistic to claim victory on behalf of consumers by “doing more.”  Because of the possibility of enforcement errors in both directions I also do not believe that it is “clear” that consumers have been harmed by the lower level of activity in merger enforcement over the past several years.  Note that I am not claiming that the statement is demonstrably false as an empirical matter.  I do not know what the optimal level of merger challenges is, but I do know that it is a function of the error costs imposed by both overactivity and underactivity.

I don’t want to go too far with this as a criticism of the Obama statement specifically.  After all, there is only so much one can do with a two pager on a candidate’s position on all of antitrust enforcement.  Besides, the statement does say that an Obama administration will review the mergers on their merits and only challenge those that are likely to harm consumer welfare.  But I guess all I’m saying is, how does he know then ex ante that his administration will challenge more mergers (much less that more is better)?