Competition Policy and Merger Analysis in Deregulated and Newly Competitive Industries

Competition Policy and Merger Analysis in Deregulated and Newly Competitive Industries

Edited by Peter C. Carstensen and Susan Beth Farmer

This comprehensive book contains case studies on the evolution of competition policy, with an emphasis on merger policy, for seven major US industries that have experienced substantial deregulation in the past forty years – electricity, natural gas, telecommunications, railroads, airlines, hospitals and banking. Also included is a comparison of the EU’s experience in attempting to bring about competition in the energy, finance, and airline industries.

Chapter 1: Introduction and Overview

Peter C. Carstensen and Susan Beth Farmer

Subjects: economics and finance, competition policy, industrial organisation


Peter C. Carstensen Susan Beth Farmer Historically, the American economy operated in two spheres. One, the competitive sphere, gave enterprises substantial discretion to set their prices and other terms of trade as well as the products they would market. Antitrust law oversaw this sphere with a set of rules that prohibited some kinds of conduct and existing structures (e.g., price fixing among competitors and single firm monopoly) and intervened to block only those major mergers that might create an undue risk of anticompetitive conduct or create a monopoly. In the view of many antitrust scholars, courts and business people, merger law was a central force in retaining an open and competitive market structure that both enhanced the long-run dynamics of these industries and permitted a light-handed control over specific conduct. The other sphere of the economy was the subject of direct economic regulation. This was most overt in the traditional fields of public utility service (gas, electricity and telecommunications) and transportation (rail, road and air). However, it also included health care and many elements of financial businesses (insurance, savings associations, banks and credit unions). Within these spheres, regulation has varied with respect to the degree of direct control over the ultimate conduct of the businesses. Traditionally, in the areas of public utilities and transportation, all aspects of service and any combination among firms was subject to direct review and control by state and/or federal regulatory authorities. The same was true in financial sectors, with some greater discretion with respect...