the top three firms—mergers could be pro-competitive. This benefit-
cost approach means that antitrust intervention must proceed on a
case-by-case basis.
Following this philosophy, the Clinton administration closely
scrutinized a number of mergers. Subject to minor conditions,
regulators approved the mega-mergers of Kimberly-Clark and Scott
Paper; Chase Manhattan and Chemical Bank; Citicorp and Travelers
Group; and Boeing and McDonnell-Douglas. However, regulators
blocked proposed mergers of Rite-Aid and Revco (prescription drug
suppliers), and Microsoft’s acquisition of Intuit (maker of Quicken
financial software), on the basis of economic evidence that reduced
competition would result. In 1998, the Justice Department blocked
the proposed merger of the defense giants Lockheed Martin and
Northrop Grumman.
After 2000, merger enforcement in the United States again
returned to a more permissive philosophy by both courts and the
administration. For example, in 2004 the court refused to enjoin the
acquisition of PeopleSoft by Oracle, even though the firms were the
leaders in top-end financial and human resources management
software. In 2006, the government approved the acquisition of
Maytag by Whirlpool, even though the two firms commanded market
shares of washing machines of 20 percent and 51 percent,
respectively.^4 Likewise, Delta Airline’s 2008 acquisition of Northwest
Airlines was uncontested.
For multinational firms, much of the action moved to Europe.
In 2001 the European Union’s Antitrust Commission blocked a
proposed merger between General Electric and Honeywell
International, although it had the blessing of U.S. authorities.
Likewise, European regulators blocked a music joint venture
between Time Warner and EMI Group. In 2008 the European
Commission approved the takeover of DoubleClick by Google but
announced an investigation into the planned acquisition of Chicago-
based Navtech by Nokia.
Most recently, antitrust authorities under the Obama
administration have occupied a middle ground in its merger
decisions. In 2010, regulators approved the takeover of the world’s
largest concert promoter, LiveNation, by Ticketmaster, the world’s
largest ticket seller. (This merger was opposed by many artists in the
industry, including Bruce Springsteen.) To gain approval,
Ticketmaster agreed to license its ticket-selling software to two452 Chapter 11 Regulation, Public Goods, and Benefit-Cost Analysis(^4) For a comprehensive discussion of recent antitrust policy, see J. B. Baker and C. Shapiro,
“Reinvigorating Horizontal Merger Enforcement,” in R. Pitofsky (Ed.) How the Chicago School Overshot
the Mark: The Effect of Conservative Economic Analysis on Antitrust(Oxford: Oxford University Press, 2008).
c11RegulationPublicGoodsandBenefitCostAnalysis.qxd 9/29/11 1:34 PM Page 452