Vivek Ghosal and Joseph Gallo

"The cyclical behavior of the Department of Justice's antitrust enforcement activity"

JEL codes: L40, L00, K00
Keywords: antitrust enforcement, economic activity, political stance, interest-group theories

Abstract: We study the cyclical behavior of antitrust enforcement as measured by the number of cases initiated by the U.S. Department of Justice. The key result is that antitrust case-activity is countercyclical. This finding is robust across alternate indicators of economic activity which include stock prices, corporate profits and business cycles, and across different types of cases. The finding of countercyclical case-activity does not appear to lend support to interest group theories that predict greater regulatory protection towards producers during economic contractions. One interpretation of our result would be that antitrust violations tend to increase during economic downturns, leading to an increase in the number of cases initiated; the broad implication being that the Antitrust Division primarily acts as an antitrust law enforcement agency. Our results show that politics, as measured by the party of the President and the Republican versus Democrat composition of the House and Senate, does not have a clear impact on case-activity. Finally, the number of cases initiated is significantly affected by the extent of funding.