By John E. Kwoka, Jr. (Northeastern University) & Tommaso M. Valletti (Imperial College Business School)
Entrenched dominant firms and anticompetitive consummated mergers pose growing problems for antitrust agencies throughout the world. A lot of thought is being given as to how to address these situations but perhaps the most obvious idea—breaking up such firms—is generally dismissed as impractical, the equivalent of trying to unscramble eggs. We disagree. We show that there have been a substantial number of successful breakups of firms, some in antitrust, more in regulated industries, and even more in the private sectors of the U.S. and U.K. as firms initiate their own restructuring. We believe that a policy of breakups can have a much greater chance at success compared to efforts to regulate such firms through rule-making conduct remedies. And we argue that breaking up such firms is facilitated by the fault lines that reveal the natural break points of these heavily merged firms We recommend that breakups be on the policy menu for competition agencies.
