Antitrust on Aisle Five: How Well Do Divestiture Remedies Work?

TL;DR

This paper evaluates the long-term effectiveness of structural divestiture remedies in antitrust cases within the U.S. grocery sector, revealing significant declines in employment and sales, and highlighting issues with asset quality and buyer capability.

Contribution

It provides systematic, empirical evidence on the long-run impacts of divestitures, emphasizing potential limitations when remedies involve substantial discretion.

Findings

Divested stores see a 31% decline in employment over five years.

Sales decline similarly following divestitures.

Assets are often transferred to lower-capability buyers, reducing remedy effectiveness.

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.