First Principles for Antitrust Review of Long-Consummated Mergers

Abstract

Antitrust populists increasingly call on the government to “break up big tech.” But antitrust enforcers would face heavy evidentiary burdens if they sought to break a company up on the premise that a long-consummated merger was unlawful from the outset and should have been blocked years ago. Specifically, they would have to prove (1) that the but-for world would likely be more competitive than the actual world; (2) that their basis for unwinding the merger was sufficiently foreseeable at the time of consummation that the merger could have been challenged then: and (3) that the prospective benefits of unwinding the merger outweigh the prospective harms, including the costs and inefficiencies that often arise from such de-integration.

The combination of these burdens would be difficult for antitrust authorities to meet, and for good reason. It should be hard for the government to unwind any merger that it reviewed before consummation (or shortly thereafter) and elected not to challenge then. Mergers present a complex mix of potential costs and benefits. The antitrust laws empower enforcement authorities to review those costs and benefits promptly and give them appropriate incentives to bring any enforcement action without delay, often before consummation. Those incentives would be weakened if antitrust enforcers could lie in wait while mergers are consummated in hopes of securing more favorable litigation burdens years later.

Keywords: antitrust, populism, Sherman Act, Clayton Act, HSR, Hart Scott, mergers, consummated mergers, M&A, Microsoft, potential competition, but-for world, divestitures

JEL Classification: K20, K21, L40, L42, L43, L44, L86