Antitrust on Aisle Five: How Well Do Divestiture Remedies Work?
Xiao Dong, Paul Koh, Devesh Raval, Dominic Smith, Brett Wendling
TLDR
Divestiture remedies in the U.S. grocery sector often fail, leading to significant declines in employment and sales for divested stores.
Key contributions
- Divested grocery stores experience a 31% decline in employment over five years.
- This decline is driven by elevated store exit rates and persistent contraction.
- Sales similarly decline for divested assets, indicating poor performance.
- Divested assets are often weaker and transferred to lower-capability buyers.
Why it matters
This paper provides crucial evidence that current antitrust divestiture remedies may be less effective than assumed, especially when merging parties have discretion. It highlights the need for authorities to re-evaluate how divestitures are implemented to ensure competitive outcomes.
Original Abstract
Antitrust authorities frequently rely on structural divestitures to address competitive concerns raised by mergers. Using census-level establishment data and proprietary transaction records from the U.S. grocery sector, we provide systematic evidence on the long-run effects of such remedies. Divested stores experience an average 31 percent decline in employment over five years, driven by elevated exit rates and persistent contraction among surviving establishments. Sales similarly decline. Transaction-level evidence indicates that divested assets are systematically weaker and are often transferred to lower-capability buyers. These findings suggest that structural remedies may be less effective when the implementation of divestitures allows merging parties substantial discretion over the assets and buyers involved.
📬 Weekly AI Paper Digest
Get the top 10 AI/ML arXiv papers from the week — summarized, scored, and delivered to your inbox every Monday.