On April 12, 2019, the Federal Trade Commission (FTC) held an information-gathering hearing on the efficacy and potential of its merger retrospective program to determine if and how it should conduct more retrospective studies of consummated mergers. Retrospective merger studies by the FTC, Department of Justice, and academics have observed adverse merger effects within the airline, hospital, and consumer goods industries, and suggest that more retrospective studies could provide insight into improving the prospective merger review process. As these past studies show, however, merger retrospectives are subject to a slew of issues regarding feasibility, methodology, and costs, which—taken separately or collectively—could lead to misleading or conflicting results. As such, the FTC should proceed cautiously when designing its studies and relying on study results when pursuing future enforcement actions or reviewing prospective mergers.

Background

A retrospective merger analysis attempts to determine ex post how, if at all, a particular merger affected competition in one or more markets. See Joseph Farrell et al., Economics at the FTC: Retrospective Merger Analysis with a Focus on Hospitals (2009). Typically, researchers use the “differences-in-differences” (DiD) method to track how a merger affected the market. DiD compares the merged entity to a control group similar to the merged entity but unaffected by the merger and observes how they differ over a period of time post-merger in metrics like product price, quality, output, and innovation. A study seeking only to measure merger effects on the market may stop there. Alternatively, a retrospective review following the case study approach may consider the agency’s initial review of the transaction and compare actual merger effects to agency predictions.