March 4, 2008

Combine And Conquer: How Antitrust Regulation Affects Mergers Part 1

Jerry Ellig

Former Senior Research Fellow

Session One: Tuesday, March 4, 2008 - 10 Things You Might Not Know About Antitrust

Dr. Jerry Ellig Senior Research Fellow Mercatus Center

Two of the top business stories currently in the media relate to antitrust rulings. Microsoft was fined a record 1.3 billion dollars by the European Commission for defying a 2004 antitrust ruling. Meanwhile, the satellite radio operators Sirius and XM are still waiting to hear on the ruling for their request for the right to merge.

Antitrust regulation is meant to enhance competition in the marketplace and keep firms from abusing monopoly power. Regulators look for companies engaging in anticompetitive actions and prosecute them, as in the Microsoft Case, and, as exemplified in the Sirius and XM case, regulators work to evaluate industry mergers for monopolistic potential.

Many experts view antitrust regulation as a necessary tool in keeping markets competitive and advocate for more activist antitrust regulation, while the opposite perspective sees antitrust regulation as a tool used to further political and economic gains for political insiders. Most economists do agree that there are myriad benefits of competition, including lower prices, higher quality goods, and more innovation. With this in mind, regulators work to maximize consumer welfare and provide the ability for entrepreneurs to enter a market.