Rethinking Merger Efficiencies

Abstract:     
The two leading merger systems - those of the United States and the European Union - treat the potential benefits and risks of mergers asymmetrically. Both systems require considerably greater proof of efficiencies than they do of potential harms if the efficiencies are to offset concerns over the accumulation or exercise of market power. The implicit asymmetry principle has important systemic effects for merger control. Not only does it stand in the way of some socially desirable mergers, but it may indirectly facilitate the clearance of some socially undesirable mergers. Neither system explicitly justifies this asymmetry and none of the plausible justifications is normatively supportable. The most likely positive explanations for the asymmetry stem from institutional frictions between the lawyer and economist classes in the antitrust agencies, self-preservationist biases by antitrust regulators, and misplaced ideological opposition to industrial concentration. In principle, the probability-adjusted net present value of merger risks should be treated symmetrically with the probability-adjusted net present value of merger efficiencies.

Number of Pages in PDF File: 54

Keywords: Merger Efficiencies, United States, European Union, Clayton Act

JEL Classification: K21

Accepted Paper Series