New Report: Kwoka and Valletti Detail Benefits of Previous Antitrust Breakups
Paper provides toolkit for how to break up corporations such as Facebook
WASHINGTON – The Open Markets Institute is pleased to publish an important new paper by the economists John Kwoka and Tommaso Valletti that looks at cases in which U.S. and European law enforcers required corporations to unwind completed mergers.
The paper, entitled “Scrambled Eggs and Paralyzed Policy: Breaking Up Consummated Mergers and Dominant Firms,” is a timely contribution, given the Federal Trade Commission’s decision last week to sue Facebook for antitrust violations and to include divestitures of Instagram and WhatsApp among the remedies sought.
Kwoka, a professor of economics at Northeastern University, and Valletti, the former chief economist for the European competition agency in Brussels, co-authored the paper.
“The usual response to the idea of breaking up dominant firms or consummated mergers is to argue that the costs and difficulties are overwhelming,” the authors write. But “many of these experiences with actual breakups are in fact successful restructurings, with major widely recognized benefits in terms of price, innovation, and investment.”
In response, Barry Lynn, executive director at Open Markets Institute, issued the following response:
“For most of the 20th century, the U.S. government routinely forced corporations to spin off acquisitions and even to break apart complex systems developed through organic growth. This includes such foundational anti-monopoly actions as the Standard Oil case of 1911, the breakup of AT&T in 1913, the Electrical Utility Holding Company Act of 1935, and the complete restructuring of AT&T in the early 1980s.
“Such actions became more rare after the Reagan-era weakening of antitrust enforcement. But, as Kwoka and Valletti demonstrate, enforcers continue to seek breakups and to deliver real benefits through these restructurings. Importantly, Wall Street bankers restructure corporations all the time for private ends. It's time that public regulators use their powers in full to restructure corporations for public ends.”
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See the full report here.