The Customer is Sometimes Right: The Role of Customer Views in Merger Investigations

Posted: 14 Jul 2008

See all articles by Darren S. Tucker

Darren S. Tucker

Vinson & Elkins LLP

Scott Reiter

O'Melveny & Myers LLP

Kevin Yingling

Google Inc.

Abstract

Antitrust enforcement officials and practitioners generally agree that customers should have a prominent role in the merger review process. The question of the appropriate level of reliance that competition authorities and courts should give to customer testimony has been the subject of considerable debate since the Arch Coal and Oracle decisions. This paper contains a comprehensive discussion of the use of customer testimony throughout the U.S. merger review process, from the initial merger notification filing to injunction proceedings in federal court. We discuss the benefits from and problems with the use of customer testimony, including how these problems have led to litigation losses for the U.S. antitrust authorities. What is the appropriate role of customer testimony and when is it most probative? We contend that customers can provide investigators and judges with information regarding several relevant issues in an acquisition, including industry structure, geographic and product demand substitution, and acceptance of potential market entrants. In contrast, customers will have considerably less information relevant to the likelihood of entry, the extent of any merger-specific efficiencies, and the validity of a failing firm defense. They will almost never be qualified to offer legal conclusions, such as the proper market definition or likely competitive effects of a proposed merger. We conclude that courts have generally remained consistent in their reliance on customer testimony, including in the Arch Coal and Oracle cases, and that customer testimony, despite its limitations, should and will continue to be important at each stage of the merger review process.

Suggested Citation

Tucker, Darren S. and Reiter, Scott and Yingling, Kevin, The Customer is Sometimes Right: The Role of Customer Views in Merger Investigations. Journal of Competition Law and Economics, Vol. 3, Issue 4, pp. 551-607, 2007. Available at SSRN: https://ssrn.com/abstract=1159266 or http://dx.doi.org/nhm014

Darren S. Tucker (Contact Author)

Vinson & Elkins LLP ( email )

2200 Pennsylvania Ave NW
Washington, DC 20037
United States

Scott Reiter

O'Melveny & Myers LLP ( email )

1625 Eye Street, NW
Washington, DC 20006
United States

Kevin Yingling

Google Inc. ( email )

1101 New York Ave., NW
Second Floor
Washington, DC 20005
United States

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