Shawn W. Ulrick

Transparency at the Federal Trade Commission: The Horizontal Merger Review Process 1996-2003

This paper empirically analyzes the Federal Trade Commissions merger enforcement decisions, to supplement the 2004 release of the Horizontal Merger Investigation Data. The study provides insights into the review process for both multi- and single-market mergers. We present concentration-based models, customized to the relevant industry, for mergers with large numbers of overlaps. When more detailed data is available (for mergers with 3 or fewer overlaps), the analyses also focus on additional factors. We find evidence to suggest that, in addition to market structure, verified customer complaints and entry considerations also affect the enforcement decision. Finally, the study notes that the Commissions enforcement policy has been stable during the 1996 through 2003 time period.

Do Court Decisions Drive the Federal Trade Commission’s Enforcement Policy on Merger Settlements?

Mergers are generally conglomerate in nature with only minor (if any) horizontal overlaps. Under U.S. law, an enforcement agency may challenge any anticompetitive aspect of the merger and the consequent delay associated with litigation would impose costs on the firm. These costs may give the enforcement agency “leverage” to extract a settlement even when the firm would prevail in court. This paper explores whether the FTC’s decisions to challenge transactions approximate the case law. We find that the representative enforcement regimes of the FTC and the courts are remarkably similar, although the FTC credits efficiencies, while courts consider buyer sophistication as a mitigating factor.

Atlantic Divide or Gulf Stream Convergence: Merger Policies in the European Union and the United States

We collect a sample of EU and US in-depth merger investigation, estimate models of the regulatory decisions and use the models to compare merger policies in the two jurisdictions. The approach used allows us to decompose observed differences between merger decisions into regime effects and case-mix effects. Focusing on dominant-firm mergers, we find that EU is tougher than the US on average and on mergers resulting in low market shares. We also find that US policy is more affected than EU policy by a range of market considerations.

Using Semi-Parametric Methods in an Analysis of Earnings Mobility

This paper describes a dynamic random effects econometric model from which inferences on earnings mobility may be made. It answers questions such as, given some initial level of observed earnings, what is the probability that an agent with certain characteristics will remain below a specified level of earnings (for example the poverty level) for a specified number of time periodsq Existing research assumes that the distributions of the unobserved permanent and transitory shocks in the model are known up to finitely many parameters. However, predictions of earnings mobility are highly sensitive to assumptions about these distributions. The present paper estimates the distributions of the random effects non-parametrically. The results are used to predict the probabilities of remaining in a low state of earnings. The results from the non-parametric distributions are contrasted to those obtained under a normality assumption. Using the non-parametrically estimated distributions gives estimated probabilities that are smaller than those obtained under the normality assumption. Through a Monte Carlo experiment and by examining unconditional predicted earnings distributions, it is demonstrated that the non-parametric method is likely to be considerably more accurate, and that assuming normality may give quite misleading results. Copyright Journal compilation Royal Economic Society 2008. No claim to original US government works

A nonparametric analysis of the black/white wage gap

This article estimates a nonparametric model of earnings to examine the black/white wage gap. This article extends the Oaxaca decomposition and adjusted wage ratios to a nonlinear form, to allow the use of this nonparametric approach. It finds that the results obtained nonparametrically are very similar to those obtained with variants of the (misspecified) Mincer model, suggesting that the parametric models may be appropriate in situations where the nonparametric estimator could not be applied.

Merger Control in the European Union and the United States: Just the Facts

Using a combination of public and internal information, this paper compares and contrasts European Union (EU) and United States (US) merger policies. Common economic analysis leads both authorities to subject remarkably comparable portfolios of mergers to close scrutiny. Vertical mergers account for less than 10%, and potential competition matters for around 5%, of in-depth merger investigations in both jurisdictions, while purely conglomerate mergers are extremely rare or non-existent. The share of collusion investigations falls over time in both jurisdictions. However, the US relies on collusion theory more than three times as often as the EU, where over 80% of the horizontal cases address dominance. Across both regimes, roughly one eighth of all recent horizontal investigations have been analysed as non-dominance unilateral-effects cases. Only minor differences in the average probability of a merger being challenged are observed when controlling for market share. The 2004 EU reforms seem to be leading towards at least some convergence of enforcement policy.

Unilateral Effects Analysis in Differentiated Product Markets: Guidelines, Policy, and Change

The Merger Guidelines highlight unilateral effects analysis as the primary anticompetitive theory in differentiated product markets. This study evaluates the Federal Trade Commission’s historical record to determine what considerations drive the internal review process, if these considerations depend on the type of competition within the differentiated market under review, and if policy has changed much over the 20 years since the 1992 Merger Guidelines were issued. The results identify the importance of price-based competition to the analysis, as markets that are characterized by price competition tend to generate significantly higher estimates for the probability of a unilateral effects finding, all else equal, especially when repositioning is difficult. Moreover, a little fluctuation is detected in policy, but no real evidence of change over the 20-year period of the study exists.

The bias in measuring disparity in outcomes via a dummy variable: A note

Disparity in an outcome between two groups is often measured via the coefficient of a dummy variable in a regression that pools both groups. The dummy is interpreted as the disparity. A casual search of the literature in economics and other social sciences reviews far too many examples of this method to catalog. Unfortunately, if the impact of one (or more) of the control variables differs between the two groups, the measured disparity (i.e., the coefficient on the group dummy) will be biased. We illustrate and derive this bias. Given the bias, we believe that one is better running separate regressions for each group and then implementing decomposition methods or predicting adjusted gaps in outcome (i.e., predicting the but-for world that would exist if the two groups had identical characteristics).

Measuring Price Dynamics: A Guide to Understanding Payer-Physician Claims Data

This paper provides a guide to understanding physician claims data. Physician claims data reflect the prices and quantity of procedures provided by physicians and billed to insurers. These data are often used by policy analysts, legal professionals, and academics to analyze price dynamics in markets for physician specialties. Given recent legislation, such data will become ever more common and accessible in the near future. The data are very complex, and there is little in terms of publically available sources to explain how they convey prices. Our goal is to aid the reader new to these data by providing a substantive overview of them.

Does Merger Enforcement Depend on the Portion of the Merger Associated with the Competitive Concerns

Most mergers involve multiple markets. The potential for settlement can vary by the fraction of the overall deal attributable to the markets of concern. (i.e., by the “overlap”). If an antitrust agency challenges a merger having only a small overlap, negotiating a settlement is very likely; but if the entire transaction is at issue, a challenge decision often leads to litigation. Regulators, antitrust attorneys, and expert economists have long wondered if the degree of overlap influences upon the agency’s challenge decision, because settlement and litigation impose disparate costs (including litigation risks and time-delays) on the agency and firms. Given over 20 years of experience with modern merger analysis, it is possible to address this question with several empirical models: (1) a two-stage estimation of the settle-challenge process, (2) decomposition analyses focused on matters exhibiting either high or low overlaps, and (3) statistical matching analyses. These models predict differences of 13 to 19 percentage points between the challenge probabilities of mergers exhibiting high and low overlaps. The difference suggests the potential for over- or under-enforcement. Comparing the FTC policy to that of the court quantifies this potential. The exact magnitude depends on the assumptions used to interpret the evidence. One set of assumptions suggests less enforcement when the overlap is high, while another set of assumptions predicts more enforcement when the overlap is low.