Conventional antitrust enforcement tries to prevent harmful mergers by blocking them but empirical evidence shows that rival stock prices often rise when a merger is blocked—suggesting that many blocked mergers would have increased competition. In other words, we may be stopping the wrong mergers. In a clever proposal, Ayres, Hemphill, and Wickelgren (2024) argue that […]
Shorting Your Rivals: A Radical Antitrust Remedy
Shorting Your Rivals: A Radical Antitrust Remedy
24 Jul 2025 Leave a comment
in applied price theory, economics of regulation, entrepreneurship, financial economics, industrial organisation Tags: competition law, competition law enforcement, mergers
A fool-proof test of the competitive impact of a merger
11 Apr 2014 Leave a comment
in industrial organisation, law and economics Tags: Aaron Director, antitrust law, competition law, mergers
Was it Frank Easterbrook in the 1980s or Aaron Director in the 1950s who said that the clearest evidence of a pro-competitive merger was if the rival firms in the same market asked the competition law enforcement agency to take action against it?
Do the competitors oppose the merger? If they do, the merger must lower prices and put their profits under pressure.
When was the last time a competitor complained about their rivals putting their prices up? Either they hold their prices and take their business or follow their pricing lead: can’t lose.
Business rivals have an interest in higher prices. Consumers seek lower prices. Easterbrook suggested that lower prices should always be lawful under competition law.
The aim of competition law is to increase consumer welfare by preventing restrictions of output that increase prices: prevent “prices that are too high” due to monopoly power. The merits of that statement is for another blog posting.
George Stigler was blunt on regulating to promote competition:
Regulation and competition are rhetorical friends and deadly enemies: over the doorway of every regulatory agency save two should be carved: “Competition Not Admitted.” The Federal Trade Commission’s doorway should announce, “Competition Admitted in Rear,” and that of the Antitrust Division, “Monopoly Only by Appointment”
Utopia, you are standing in it! 
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