A Comparative Look at Failing Firms and Failing Industries

Abstract

The United States has pursued an ad hoc strategy in dealing with dying firms, dying industries, and industrial rationalization from an antitrust perspective. While formal antitrust doctrine does not permit consideration of factors other than the impact on competition, prosecutorial discretion has permitted from time to time a consideration of more general public interest factors.

The foreign treatment of failing firms and failing industries is a particularly important area to consider given that the US approach is so different from that of the rest of the world. Most foreign systems permit the consideration of more general social and public-interest factors in deciding the legality of an agreement or acquisition that has some effect on competition. The European Union and New Zealand stand out as two reasonably successful foreign legal systems that permit the explicit consideration of non-antitrust concerns as part of a public interest authorization process.

This article examines how the US, the EU, and New Zealand operate in exempting agreements and acquisitions that injure competition, but nonetheless serve other important societal goals. Each of these systems can be praised for serving the important legal, historical, and cultural interests of its own society. However, for better or worse, relatively little of this experience can be transferred to the US in a way that would be an improvement over the narrowly drawn failing firm doctrine in US antitrust law.

Keywords: antitrust, competition law, public interest, failing firms, merger guidelines, failing industries, industrial policy, European Union, New Zealand, Commerce Commission, Commerce Act, individual exemption, European Commission

JEL Classification: d42, K21, l12, l40, l41, l42, l43, l44, l52