Efficiencies in Merger Analysis
Harvard Law School John M. Olin Center Discussion Paper No. 1056
51 Pages Posted: 29 Mar 2021
Date Written: March 25, 2021
The supposed ubiquity of potential efficiencies is understood to justify permitting most horizontal mergers despite their tendency to raise prices. Yet efficiencies are said to be rarely decisive in actual merger decision-making. Moreover, the economic analysis of merger efficiencies lags far behind that of anticompetitive effects. This article addresses this analytical gap, drawing attention to the merger specificity of both efficiencies and anticompetitive effects, the teachings of neglected literature such as that on the theory of the firm, and the relevance of vertical efficiencies to horizontal mergers. The analysis is applied to economies of scale, economies of scope, and the sharing of assets between competitors. In addition, a focus on the long-run effects of merger policy shifts the debate on consumer versus total welfare (and regarding pass-through), alters the relevance of entry, and draws attention to endogenous asymmetries across firms and differences in the degree of competition across sectors of the economy. Finally, efficiencies are situated in a merger assessment framework, emphasizing how basic prescriptions of decision analysis conflict with official protocols for merger decision-making.
Keywords: Efficiencies, horizontal mergers, economies of scale, economies of scope, theory of the firm, entry, efficiency credit, burden of proof
JEL Classification: D23, K21, L22, L24, L41
Suggested Citation: Suggested Citation