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The effects of global leniency programs on margins and mergers
Author(s) -
Dong Ailin,
Massa Massimo,
Žaldokas Alminas
Publication year - 2019
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12299
Subject(s) - cartel , collusion , amnesty , business , enforcement , downstream (manufacturing) , industrial organization , gross margin , international economics , economics , finance , marketing , political science , politics , law , profitability index
In a cross‐country study, we investigate how staggered passage of national leniency programs from 1990–2012 has affected firms’ margins and merger activity. We find that these programs, which give amnesty to cartel conspirators that cooperate with antitrust authorities, reduced the gross margins of the affected firms. However, firms reacted to new regulations by engaging in more mergers that had negative effects on downstream firms. Our results imply that although these programs were generally effective, their full potential was mitigated by mergers that substitute for cartels, and that a strong merger review process might be a prerequisite for strengthening anti‐collusion enforcement.