Efficiencies in Merger Analysis: Alchemy in the Age of Empiricism?

Abstract

One is hard-pressed to find in law an undertaking more fraught with uncertainty than the application of the efficiencies defense in merger analysis. Generalist fact finders (judges) and politically-attuned government officials (prosecutors and regulators) are charged with two Herculean tasks: (1) predicting the outcome of organic changes in business enterprises and (2) comparing the magnitude of those changes to the equally uncertain amount of harm to future competition that the transaction will cause. Given the enormous, perhaps intractable, uncertainty of this inquiry, it is therefore paradoxical that many of the strongest advocates for strengthening the role of efficiencies analysis in merger reviews are self-described proponents of bringing a ‘new empiricism’ to antitrust analysis. This chapter focuses on the tensions inherent in incorporating an efficiencies defense (or evaluating efficiencies as part of the appraisal of mergers) and maintaining the rigour and impartiality promised by proponents of the ‘empirical’ approach. This argument should not be misconstrued as a brief for abandoning the efficiencies inquiry altogether. Rather, it is, first, an appeal for candour (and humility) by those undertaking the inquiry; and second, it is a brief for constraining discretion by imposing more clearly delineated presumptive rules of law on judges and insisting on greater transparency by agencies in deciding whether to challenge mergers.

Keywords: Antitrust, mergers, efficiencies defense, empiricism, merger guidelines, FTC, Clayton Act