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Bureau of Economics: Economic Reports

Bureau of Economics Reports: Major, published reports, usually containing original research and entailing a substantial commitment of resources, concerning an issue of current policy interest or of long term impact on Federal Trade Commission antitrust or consumer protection missions.

The more recent Economic Reports are offered in Adobe Acrobat PDF format, except for The Salt Producers Discount Practices report and the "Fat Study," neither of which can be offered electronically. To receive copies of these two reports, click on "Copy of Report." This will initialize a "mailto" window. Include the title of your request and your mailing address and send the message.

If you have trouble accessing one of these reports, please contact Tangela Roundtree at (202) 326-2361.

The Petroleum Industry: Mergers, Structural Change, And Antitrust Enforcement: A Report of the Staff of the Federal Trade Commission Bureau of Economics (August 2004)
The Effect of Mortgage Broker Compensation Disclosures on Consumers and Competition: A Controlled Experiment, James M. Lacko and Janis K. Pappalardo (February 2004).

This report presents the results of a study that uses a controlled experiment with over 500 recent mortgage customers to examine the mortgage broker compensation disclosure proposed by the Department of Housing and Urban Development (HUD) as part of its July 2002 RESPA reform proposal. The focus of the disclosure is on any “yield spread premium” paid by the lender to the broker for loans originated with “above par” interest rates. The study finds that the disclosure is likely to confuse consumers, cause a significant proportion to choose loans that are more expensive than the available alternatives, and create a substantial consumer bias against broker loans, even when the broker loans cost the same or less than direct lender loans. The report concludes that a better way to help consumers obtain less expensive mortgages would be to encourage and facilitate consumer comparison shopping on loan costs.

Full Report [PDF 2.9M]
Executive Summary [PDF 261K]
Text of the Report [PDF 1.1M]
Appendices [PDF 1.14M]
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News Release

Advertising Nutrition & Health, Evidence from Food Advertising 1977-1997, Pauline M. Ippolito and Janis K. Pappalardo (September 2002)

This report reviews data collected by Commission staff on the types of claims made in 11,647 advertisements taken from a sample of eight leading magazines between 1977 and 1997. The primary focus of the study is on advertising claims related to health and nutrition, but it also examines other types of advertising claims. The report further reviews how nutrition-related claims in advertising changed under the various regulatory policies in place during these years. It is revealed that nutrition-related claims were a major focus of food advertising and an important focus of competition during the two-decade period covered by the report. Moreover, data indicate a sustained movement toward specific nutrient claims, such as "low fat," in place of, or in addition, to more general nutrition claims, such as "nutritious." The study finds that changes in advertising content appear to be associated with changes in regulatory rules and enforcement policies.

Executive Summary [PDF 599K]

Text of Report [PDF 3.25M]

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Competition and Consumer Protection Perspectives on Electric Power Regulatory Reform, joint report of the Bureau of Economics with the Bureau of Consumer Protection, Bureau of Competition, and Policy Planning, (July 2000).

This policy analysis examines various competition and consumer protection issues that arise in restructuring the electric power industry. The topics were addressed by FTC staff in comments to state regulatory commissions and to FERC, and include existing market power in generation services; vertical discrimination in transmission access; affiliate transactions; horizontal mergers; vertical and convergence mergers; retail competition entry conditions; and advertising claims, information disclosures, and deceptive business practices. The report also incorporates information on these topics gathered at the FTC's public workshop on market power and consumer protection issues in this industry.

Survey of Rent-to-Own Customers, James M. Lacko, Signe-Mary McKernan, and Manoj Hastak (April 2000): This report presents the results of a nationwide survey of rent-to-own customers. The survey found that most rent-to-own merchandise is ultimately purchased by the customer, most customers are satisfied with their rent-to-own transactions, and most customers are treated well if they are late making a payment, although some customers are subject to possibly abusive collection practices. The report recommends that the total cost of purchasing merchandise through a rent-to-own transaction be disclosed on product labels that the consumer can see while shopping, in addition to disclosures in rental agreements and advertisements.

Executive Summary
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Transformation and Continuity: The U.S. Carbonated Soft Drink Bottling Industry and Antitrust Policy Since 1980, Harold Saltzman, Roy Levy, and John C. Hilke (November 1999): This report analyzes the U.S. carbonated soft drink ("CSD") industry, with its primary focus on the 1980s and early 1990s, a period of rapid structural change that transformed the industry. In addition to documenting these changes, an empirical model is developed to evaluate the antitrust merger policies that were pursued by the Federal Trade Commission ("FTC") during this period -- the FTC challenged large horizontal acquisitions of Dr Pepper and 7UP franchises by Coca-Cola and Pepsi-Cola bottlers, but did not challenge vertical acquisitions of CSD bottlers by their franchisors or other horizontal bottler acquisitions. The findings tend to support or are consistent with these policies, but also identify areas that seem to warrant further study.

Executive Summary

Text of Report [PDF 500K]

The Pharmaceutical Industry: A Discussion of Competitive and Antitrust Issues in an Environment of Change, Roy Levy (March 1999): The report reviews significant informational, institutional, and structural changes that have influenced price and non-price competition strategies of brand-name pharmaceutical companies, particularly during the last 15 years. The study considers the possible antitrust implications of these changes by examining alternative anticompetitive and procompetitive explanations for the pricing, vertical contracting, and vertical and horizontal consolidation strategies that have emerged in this environment of change in the pharmaceutical industry.

Executive Summary
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A Generic Copy Test of Food Health Claims in Advertising, Dennis Murphy (principal author), Theodore H. Hoppock and Michelle K. Rusk (contributing authors) (November 1998) [a joint report of the Bureau of Economics and the Bureau of Consumer Protection].

Executive Summary
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Appendix A [PDF 2MB]

Appendix B [PDF 220K]

Competition and the Financial Impact of the Proposed Tobacco Industry Settlement, joint report of the Bureau of Economics with the Bureau of Competition and the Bureau of Consumer Protection (September 1997): The report analyzes the potential impact of the proposed tobacco industry settlement on cigarette prices, industry profits, and government revenues. The main conclusions of the report are that (1) the antitrust exemption may reduce competition in the industry and allow the industry to profit from the settlement by raising prices more than enough to cover the annual payments requires; (2) since the annual payments are essentially equivalent to an excise tax, even if the settlement does not have anti-competitive effects, we can expect that cigarette prices will rise by enough to generate revenues to make the annual payments; and (3) the government revenues will increase due to the settlement.

Executive Summary

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Information and Advertising Policy: A Study of Fat and Cholesterol Consumption in the United States, 1977-1990, Pauline M. Ippolito and Alan D. Mathios (September 1996): The study examines changes in the consumption of fat, saturated fat, and cholesterol from 1977 to 1990, a period when federal policy governing diet-disease claims changed. The study finds that dietary improvements occurred more rapidly in the post-1985 years, when the rules were relaxed. The study also includes a variety of detailed data on differences in consumer knowledge and sources of dietary fats over the period.

Executive Summary

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The Effectiveness of Collusion Under Antitrust Immunity: The Case of Liner Shipping Conferences, Paul S. Clyde and James D. Reitzes (January 1996) [PDF 162K]: This study analyzes whether ocean shipping rates are affected by the presence and practices of ocean liner conferences. The study provides some support for the conclusion that some aspects of the conference system may contribute to higher shipping rates, particularly when the conference has a sizable market share.

Disentangling Regulatory Policy: The Effects of State Regulations on Trucking Rates, Timothy P. Daniel and Andrew N. Kleit (November 1995) [PDF 165K]: This study estimates the relationship between intrastate trucking rates and three different types of state-level regulations: 1) the strictness with which rates are regulated; 2) the requirements placed on motor carriers seeking to enter the market; and 3) whether the state provides antitrust immunity for decisions made by motor carrier rate bureaus.

The Salt Producers Discount Practices Before and After the Robinson- Patman Act and the FTC's Challenge to Them: The Morton and International Salt Cases , John L. Peterman (October 1995)

This study describes the pricing and distribution of salt during the National Industrial Recovery Act period and beyond (1930-1945). Two FTC cases brought to enforce the Robinson-Patman anti- discrimination law during this period are examined in some detail. Also included is a statistical description of industries in which the FTC brought Robinson-Patman Act cases between 1936 and 1980.

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Measurements of Market Power in Long Distance Telecommunications, Michael R. Ward (April 1995) [PDF 504K]: This study assesses empirically the competitiveness of the long distance telephone market. To do so, it estimates firm-specific long- run demand elasticities for AT&T and its rivals for long distance service marketed to households and small businesses during 1988-91.

Older Economic Reports
The reports below are not available online. To receive a copy of one of these reports, please call Tangela Roundtree at (202) 326-2361.

1994

1. Resale Price Maintenance: An Economic Study of the FTC's Case Against Corning Glass Works, Pauline M. Ippolito and Thomas R. Overstreet, Jr., January 1994.

The study is intended to help increase understanding of the economic motivation for RPM when the products at issue are relatively simple goods that do not fit the most well-known efficiency rationales for the practice. The study found no evidence of collusion among Corning's dealers or competitors, and stock market movements (as well as the value of sales) for Corning and some of its competitors do not support anticompetitive theories. The authors find the results "consistent with the theory that RPM may at times be used as a method of increasing distribution of 'simple' products sold through multiproduct dealers."

2. Effects of Unfair Imports on Domestic Industries: U.S. Antidumping and Countervailing Duty Cases, 1980-1988, Morris E. Morkre and Kenneth H. Kelly, February 1994.

The study analyzes the effects of dumped and/or subsidized imports on the domestic industries with which they competed. The authors found that, in nearly 90 percent of the 179 cases analyzed, unfair imports caused reductions in domestic industry revenue of less than 10 percent.

1993

No reports available from 1993.

1992

1. Case Studies of the Price Effects of Horizontal Mergers, Laurence Schumann, Robert P. Rogers, and James D. Reitzes, April 1992.

The study examines the aftermath of mergers in three industries: titanium dioxide, cement, and corrugated paperboard. The study finds a mixture of results with likely pro-competitive outcomes in cement and paperboard, and a potentially large anti-competitive outcome in titanium dioxide (depending on the model specification).

2. An Analysis of Department Store Reference Pricing in Metropolitan Washington, Ronald S. Bond and R. Dennis Murphy, September 1992.

This report presents empirical evidence on the likely consumer injury associated with department store reference pricing, the common pricing strategy in which sale prices are contrasted prominently with regular prices in newspaper advertising. The study concludes that although regular prices claimed by department stores are higher than consumers would likely find elsewhere, the so-called sale prices are generally quite competitive.

1991

1. Petroleum Tariffs as a Source of Government Revenue, Keith B. Anderson and Michael R. Metzger, February 1991.

The study evaluates the desirability of import tariffs on crude oil and refined petroleum products. Such tariffs would cost consumers between $2 and $5 per dollar of revenue raised. Excise taxes, on the other hand, would cost consumers $1.05 to $1.13 per dollar of revenue raised.

1990

No reports available from 1990.

1989

1. Local Building Codes and the Use of Cost-Saving Methods, Richard Duke, January 1989.

2. A General Equilibrium Analysis of the Welfare and Employment Effects of US Quotas in Textiles, Autos, and Steel, David G. Tarr, February 1989.

Using state-of-the-art modeling techniques, this report examines the costs of trade restraints in three industries. Findings indicate that voluntary export restraints in these industries cost the U.S. $21 billion in 1984 while "protecting" 174,000 jobs in the three industries. Thus, the annual cost of each job protected is approximately $120,000.

3. Economics of Sham Litigation: Theory, Cases, and Policy, Christopher C. Klein, April 1989.

Report examines court records on public and private Sherman Act "countersuits" entailing allegations of sham litigation, between 1972 and 1985. Using an empirical approach, the report seeks to answer the question of "whether case law involving Sherman Act countersuits alleging sham litigation has developed in a way that appropriately discourages the use of adjudicative proceedings to produce anticompetitive outcomes".

4. Mergers in the U.S. Petroleum Industry, 1971-1984: An Updated Comparative Analysis, Jay S. Creswell, Jr., Scott M. Harvey, and Louis Silvia, May 1989.

Reviews recent evidence on oil industry mergers and concludes that conglomerate mergers have become less important and the mergers have had little impact on industry concentration.

5. Health Claims in Advertising and Labeling: A Study of the Cereal Market, Pauline M. Ippolito and Alan D. Mathios, August 1989.

An empirical examination of the effects of the health claims in fiber cereals which began in 1984. Evidence indicates that health claims in advertising significantly alter consumer behavior and reach groups not otherwise reached by government and general health information.

6. An Analysis of the Maritime Industry and 1984 Shipping Act, Timothy P. Daniel, Alan D. Mathios, and James Reitzes, November 1989.

The analysis provides a brief background of the ocean shipping industry and its regulatory history, and describes and evaluates the rationales for regulating that industry. Section VII analyzes the effects of the 1984 Act, with particular attention to: 1) the roles of service contracts and independent action; 2) the structure of shipping rates; and 3) the levels of shipping rates.

7. The Effects of FTC Antitrust Challenges on Rival Firms 1981-1987: An Analysis of the Use of Stock Returns to Determine the Competitive Effects of Horizontal Mergers, Laurence Schumann, December 1989.

The study examines recent FTC merger enforcement and uses stock market evidence to confront prior research which argued that the FTC tended to challenge pro-competitive mergers. The study finds that the evidence is equally consistent with the FTC challenging mergers that simultaneously have both pro-competitive and anti-competitive effects.

1988

1. The Effect of State Certificate-of-Need Laws on Hospital Costs: An Economic Policy Analysis, Daniel Sherman, January 1988.

Study evaluates the effects of CON regulation on hospital costs using 1983-1984 data for a national sample of 3708 hospitals. Study finds no evidence that CON programs have led to the resource savings they were designed to promote, but rather indicates that reliance on CON review may raise hospital patient treatment costs. Study also finds that among independently-operated hospitals, state and local government hospitals and for-profit hospitals have costs between 5.5 and 13 percent lower than those of voluntary hospitals. However, costs of for-profit and government hospitals appear to be higher than those of system voluntary hospitals when these hospitals are either owned, leased, or managed as part of a hospital system.

2. Resale Price Maintenance: Economic Evidence from Litigation, Pauline Ippolito, April 1988.

Report reviews all 203 public and private RPM cases from 1976 to 1982 (pre-Monsanto decision). Finds that case records are consistent with several of the efficiency-enhancing rationales for the use of RPM (e.g., "free rider" and more recent agency theories). Only 15 percent of cases appear consistent with collusion theories of RPM that would be associated with reduced consumer welfare.

3. An Analysis of the Funeral Rule Using Consumer Survey Data on the Purchase of Funeral Goods and Services, Timothy P. Daniel, April 1988.

4. Regulation of Advertising: Capital Market Effects, Alan D. Mathios and Mark Plummer, May 1988.

Report finds that firms who lose litigated FTC advertising cases can suffer a 5 percent loss in market value. The report also examined NAD, NARB, and Lanham Act cases.

5. The Impact of State Price and Entry Regulation on Intra-State Long Distance Telephone Rates, Alan D. Mathios and Robert P. Rogers, November 1988.

Study finds that states using price cap regulation have 7-10 percent lower long-distance rates than states using rate-of-return regulation. In addition, state regulatory entry barriers tend to increase the price of long-distance telephone service.

1987

1. State Regulation of Takeovers and Shareholder Wealth: The Effects of New York State's 1985 Takeover Statutes, Laurence Schumann, April 1987.

Study examines the stock market's reactions to two anti-takeover statutes passed by New York State in 1985. Findings indicate that the law resulted in an average decline in equity value of nearly one percent ($1.2 billion) for a sample of 94 firms governed by the statute.

2. A Critical Evaluation of Petroleum Import Tariffs: Analytical and Historical Perspectives, Keith B. Anderson and Michael R. Metzger, April 1987.

A cost/benefit analysis of a petroleum import tariff. The study finds that such a tariff imposes a net loss on society and is an inefficient means of attaining any national goals.

3. Competition Among Hospitals, Monica Noether, May 1987.

Hospital price and expense data for 1978-79 are examined to identify the effects of competition. The results imply that a reduction in market concentration results in an increase in both price and quality competition. Other results concerning the effect of nonprofit organization, CON laws, hospital management, etc., are also obtained.

4. Restrictions on Dental Auxiliaries, J. Nellie Liang and Jonathan Ogur, May 1987.

Examines empirically the effects of various state restrictions on the number and use of dental hygienists and assistants. Concludes that relaxation of restrictions on the number of hygienists that a dentist may employ would benefit consumers by providing the same quality of service at a lower price. Gains to consumers could reach $1 billion per year.

5. International Competitiveness and the Trade Deficit, John C. Hilke and Philip B. Nelson, May 1987.

Using statistical analysis, the study concludes that industry-specific factors (unfair trade practices, low R&D, union work rules, antitrust laws, etc.) are not the cause of the aggregate U.S. trade deficit. Rather, the trade deficit is the result of economy-wide factors such as exchange rate changes and relative economic growth.

6. Minimum Quality Versus Disclosure Regulations: State Regulation of Interstate Open-ended Investment Company and Common Stock Issues, John Hilke, June 1987.

7. The Potential for Tax Gains as a Merger Motive: A Survey of Current Knowledge and Research Opportunities, Denis A. Breen, July 1987.

Evaluates the literature on the "tax-incentive" hypothesis that tax provisions provide important incentives for mergers, particularly mergers which, though they may not be anticompetitive, are inefficient.

1986

1. Investigating Oligopolies within the Laboratory, Daniel Alger, January 1986.

Investigates competitive theories that form the basis of antitrust policy, using experimental methods.

2. The Effect of State Entry Regulation on Retail Automobile Markets, Robert P. Rogers, January 1986.

Estimates the effect on consumer welfare of state laws restricting the establishment of new automobile dealerships in the vicinity of present dealers selling cars of the same make. These laws may raise new automobile prices about six percent.

3. Certificate of Need Regulation of Entry into Home Health Care, Keith B. Anderson and David I. Kass, January 1986.

Examines the justification for requiring Certificate of Need approval for home health care providers. No evidence is found that home health firms located in states with these regulations achieve available economies of scale to a greater degree than firms in unregulated states.

4. Product Quality & Information in the Used Car Market, James M. Lacko, June 1986.

Assesses evidence on product quality problems in the used car market and looks at the effects of various state laws that attempt to improve the market.

5. Empirical Approaches to Consumer Protection Economics (Conference Volume), Pauline M. Ippolito and David T. Scheffman (Editors), June 1986.

Proceedings of a conference on consumer protection regulation. Twelve papers by academic and government economists dealing with various advertising and product quality problems.

6. Concentration, Integration, and Diversification in the U.S. Grocery Retailing Industry, Russell Parker, June 1986.

Statistical report on grocery retailing for Census years 1954-1977. Contains SMSA concentration data and other profit and sales data.

7. Experimental Studies of Markets with Buyers Ignorant of Quality Before Purchase: When Do Lemons Drive Out High Quality Products?, Michael Lynch, September 1986.

Experiments indicated that if sellers could not develop reputations for poor quality, then the market would consist entirely of poor quality products. The need to attract re-purchase is not sufficient incentive to have the seller build a reputation for supplying good quality, while the imposition of a requirement for truthful advertising or labelling is sufficient.

1985

1. A Time-Series Investigation into Factors Influencing U.S. Auto Assembly Employment, Michael C. Munger, February 1985.

An analysis of the recent rise in unemployment in the automobile industry; finds that the 1980-82 recession and high wages paid U.S. auto workers largely responsible for the unemployment rise; U.S. imports of automobiles not a major factor.

2. U.S. Federal Trade Commission, Bureau of Economics, Annual Line of Business Report 1977: A Statistical Report, April 1985.

The last in a series of five Annual Line of Business Reports to be published by the Commission for the years 1973-1977. The report contains industry aggregates and financial ratios compiled from line of business financial data submitted by approximately 470 large diversified U.S. manufacturing companies.

3. Generic Substitution and Prescription Drug Prices: Economic Effects of State Drug Product Selection Laws, Alison Masson and Robert L. Steiner, September 1985.

An analysis of the effects of state drug product selection laws and the growth of generic drugs; looks at earlier recommendations in the FTC/FDA model statute.

4. The Availability and Utility of Consumer Information on Auto Insurance, Mark Plummer, October 1985.

Congressionally requested study finds that consumer information on auto insurance is widely available and that consumers use this information in making their purchases.

5. Life Insurance Products and Consumer Information, Michael Lynch, October 1985.

Congressionally requested study that assesses life insurance policies and the adequacy of consumer information. Suggests that there may be information problems in some segments of the market.

6. Antitrust Policy for Declining Industries, Mark W. Frankena and Paul A. Pautler, October 1985.

Assesses the value of a revision in antitrust policy that gives a special exemption to declining industries. Concludes that such an exemption would likely allow anticompetitive mergers which produce no offsetting efficiencies, thus weakening U.S. industries in their efforts to compete with foreign-made products.

7. The Role of Collective Pricing in Auto Insurance, Jeffrey A. Eisenach, November 1985.

A Congressionally requested cross-state empirical analysis of the effects of collective ratemaking and state regulation on auto insurance premiums. Finds that collective ratemaking has no effect on premiums in the presence of state regulation. Also finds that state regulation raises premiums in some states and lowers premiums in others.

1984

1. Aggregate Costs to the United States of Tariffs and Quotas on Imports: General Tariff Cuts and Removal of Quotas on Automobiles, Steel, Sugar, and Textiles, David G. Tarr and Morris E. Morkre, December 1984.

Assesses the losses to U.S. consumers and producers of tariffs and quotas in four U.S. industries; estimates that the total losses of trade restrictions in these industries are nearly $13 billion annually.

2. Firm Size and Regulatory Compliance Costs: The Case of LIFO Regulations, John C. Hilke, December 1984.

This report presents and analyzes empirical data on the costs of complying with regulations governing the use of LIFO, an inventory accounting system that allows firms to adjust their stated earnings to reflect the effects of inflation. The conclusion is that LIFO regulations have imposed compliance costs that are proportionately much larger for small firms than for large firms.