Academic journal article Journal of Applied Economics & Policy

An Examination of Multistate Antitrust Enforcement by U.S. State Attorneys General

Academic journal article Journal of Applied Economics & Policy

An Examination of Multistate Antitrust Enforcement by U.S. State Attorneys General

Article excerpt

I. Introduction

For decades after the passage of the Sherman Antitrust Act, public antitrust enforcement was by-and-large conducted at the federal level. Although many states over that period had enacted statutes similar to the Sherman Antitrust Act, few states maintained active programs to enforce these statutes (Myers and Ross 2008; Rose 1994). The states' minimal role in antitrust enforcement began to change, however, in 1976, when Congress enacted legislation that greatly expanded the authority of state attorneys general (AGs) to enforce federal antitrust statutes and provided states with funds to create and implement enforcement divisions within their respective AG offices. Subsequently, numerous state legislatures enacted or amended state laws to grant AGs similar antitrust enforcement authority, further broadening state AG antitrust enforcement powers. In the meantime, federal deregulation under the Reagan Administration during the 1980s created a regulatory gap that many state AGs believed needed to be filled (Dove 2010, forthcoming).

In response to their new empowerment under federal legislation and the devolutionary policies of the Reagan Administration, state AGs began to coordinate their enforcement efforts under the guidance of a 1983 initiative of the National Association of Attorneys General (NAAG). With multiple states participating, state AGs were able to pool resources and bring antitrust cases against even large firms that would have been cost-prohibitive for an individual AG to pursue. These significant federal and state legislative changes, federal deregulatory policy, and the increased coordination among state AGs contributed to state AGs assuming the role of a de facto third national antitrust enforcement branch, along with the Department of Justice and Federal Trade Commission (Constantine 1991; Flexner and Racanelli 1993).

The economics literature is replete with studies of antitrust enforcement and policy issues at the federal level; yet, despite the dramatic rise in the role of state AGs in antitrust enforcement, much less has been done to evaluate state enforcement. For instance, there has been extensive analysis of antitrust enforcement decision-making processes and influences. Coate et al. (1990) and Coate (2005), examines the factors underlying FTC decisions of whether or not to challenge proposed mergers.1 Additionally, a substantial number of studies have attempted to evaluate the overall efficacy of antitrust policy. Crandall and Winston (2003) review the literature dealing with the economic impacts of federal antitrust policy and enforcement and find little empirical evidence that antitrust policy benefits consumers or curtails anticompetitive behavior. Finally, Besanko and Spulber (1989) and Ghosal and Gallo (2001) highlight some institutional constraints affecting antitrust enforcement, including asymmetric information and budgetary issues, respectively.

We hope to build on this research and contribute to a more complete understanding of the antitrust landscape by focusing on the role of state AGs in antitrust enforcement. Overall, this study explores the emergence of this de facto third national antitrust enforcement branch. Specifically, while multistate antitrust actions have increased over time, a growing disparity has emerged among the actual participation rates of individual states. The purpose of this paper is to explore and empirically analyze potential explanations for this divergence. An increased understanding of the factors affecting state AG decisions to participate in multistate antitrust actions should facilitate useful comparisons between state AG enforcement and traditional, federal agency enforcement.

We posit that state AG participation in multistate antitrust actions can be explained by political considerations-including the method of selecting state AGs, party affiliation, and interest group effects-along with changes in the antitrust legal regime that have simultaneously increased benefits and lowered costs of pursuing such actions. …

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