Settle for now but block for tomorrow: The deterrence effects of merger policy tools

Antitrust policy involves not just the regulation of anticompetitive behavior but also an important deterrence effect. Neither scholars nor policy makers have fully researched the deterrence effects of merger policy tools because they have been unable to empirically measure these effects. We consider the ability of different antitrust actions-blocked mergers, negotiated settlements, and monitorings-to deter firms from engaging in mergers. We use cross-jurisdiction/pantime data on merger policy to empirically estimate the impact of antitrust actions on future merger frequencies. We find that blocked mergers lead to decreased merger notifications in subsequent periods and that negotiated settlements weakly increase future merger notifications; in other words, blocked mergers involve a deterrence effect, but negotiated settlements do not.