The Political Economy of Merger Regulation

Abstract

Free market ideology comes to merger regulation from two sides. On the one hand, proponents of free markets desire as much competition as possible and expect the government to ensure that no player dominates the field. On the other hand, neo-liberals are wary of any government intervention in the market; if the market demands that two companies merge, who is the government to object? Market rhetoric therefore cuts both ways.' This basic ambiguity in the free market faith enables competition authorities to invoke the spirit of the market no matter what they do. In fact, though all merger authorities are likely to pay respects to the market, merger review will usually involve elements of 'industrial policy' too.2 Because neither an activist nor a laissez-faire merger authority is transparently antimarket, industrial policy might motivate merger regulation in a wide range of political environments. Nevertheless, industrial policy is more important to merger regulation in the European Union than it is in the United States.