Fight cartels or control mergers? On the optimal allocation of enforcement efforts within competition policy

Abstract

This paper deals with the optimal enforcement of competition law between merger and anti-cartel policies. We examine the interaction between these two branches of antitrust, given the budget constraint of the public agency, and taking into account the ensuing incentives for …rms in terms of choice between cartels and mergers. To the extent that a tougher anti-cartel action triggers more mergers and vice-versa, we show that the two antitrust branches are complementary. However, if the merger's coordinated e¤ect is taken into account, then for a su¢ciently large such e¤ect the agency may optimally have to refrain from controlling mergers and instead spend all resources on …ghting cartels.

Transversal Agency and Crowding Out

“…By (9), we have @P 1 @e 10 = @P 2 @e 20 , and by (6) and 7, @P i @e i i = 1. Plugging these in we obtain dW dM = @P 2 @e 20 1 + This condition de…nes the optimal budget M implicitly.…”

“…Still, our model can be adapted to include Type I errors without changing our conclusions. 6 Each agency has a given budget at its disposal. Let M denote total resources available to the competition agency.…”

“…Other resources are spent on aspects of regulating the industry that are unrelated to the competition agency's monitoring. In particular, sectoral regulator i = 1; 2 decides to put in resources 6 To see this, note that conditions (2) and (3) can be adjusted to the existence of mistakes. in particular, suppose that, conditional on …nding a violation, it is a mistake with probability 2 [0; 1), and that this mistake is not observed by the agency.…”

The merger paradox, collusion, and competition policy

“…Once again the author assumes that collusion is not a motive for mergers, unlike in our work. In a different framework, Cosnita‐Langlais and Tropeano (2013) also analyze the connections between merger and anticartel policies. However, they focus on the budget allocation of the competition authority between collusion detection and merger analysis.…”