Retrospective merger analysis


I appeared (by telephone) before the Senate banking inquiry yesterday. The press appear to have paid more attention to Gail Kelly than my pearls of wisdom.

One ‘left field’ question related to retrospective examination of ACCC merger decisions. Should someone (perhaps the Productivity Commission) take a look at the ACCC merger decisions over the past decade and see whether they have ‘made a difference’? Does the evidence show that the ACCC is applying the regulatory test at the right point, or is it being too soft or too hard?

This type of retrospective study represents best regulatory practice. The U.S. antitrust authorities have carried out this type of study. One recently published example is in the Review of Industrial Organization (subscriber only).  However, such a study is a major piece of work as the econometricians have to try and tease out the relevant effects.

The benefits of such a study are clear. It allows feedback to both the regulators and the legislature about our competition laws and their implementation. If the federal government made the resources available to do this exercise (and required relevant businesses to provide relevant data, such as retail scan data) then this would be a good outcome.

4 Responses to "Retrospective merger analysis"
  1. Well, yes, it might be regulatory best practice.  But we all know that those who asked you this question are just looking for an excuse to call for a Bell-style break-up of every major bank, supermarket and petrol retailer in the country.  For that reason, if not for many others, we have much to fear from such a study.

  2. The benefits of such a study are clear…. 

    Oooh yes, the benefits of such a study to econometricians are very clear ….

    But I think the likely outcome is the direct opposite to that Francis Forde fears.  With so many confounding factors, and the construction of a counterfactual so difficult, it will be very hard to rigorously demonstrate any effect of decisions.  Which is not the same, of course, as there being no effect of decisions.

    The vested interest opponents of the ACCC would then very quickly shift from “it should be abolished because it’s pernicious” to “it should be abolished because it’s ineffective”.

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