Does Antitrust Enforcement Affect Industry Dynamics? Evidence from 40 Years of US DOJ Lawsuits,

We construct a comprehensive dataset of antitrust lawsuitsled by the Department of Justice (DOJ) between 1980 and 2018, that includes the geographic scope and industries of the targeted companies. We find a continued secular decline in the number of antitrust lawsuits led by the DOJ relative to the early 1980s, with wide variation across industries. We use this new dataset to study the systematic effect of antitrust lawsuits on industry dynamics, as measured by employment growth. We compare the employment growth of a nontradable industry located in a particular state that is the target of a DOJ lawsuit with the same non-tradable industry located in other states. In an event-study framework, wed that employment is relatively stable in the years leading up to antitrust lawsuits, but increases significantly in the years immediately following the lawsuit. The effect is stronger for local lawsuits and lawsuits remedying older violations. Our results suggest that antitrust enforcement has an important role in curbing anticompetitive behavior by firms and has a positive effect on aggregate outcomes.