Federal and State Philosophies in the Antitrust Law of Mergers

Abstract

The antitrust policy of the states with respect to horizontal mergers and acquisitions reveals a markedly different philosophy of the role of government in antitrust enforcement from that underlying federal policy. The states' philosophy emphasizes concern for the distribution of wealth in society as opposed to the strict economic efficiency concerns of the federal enforcement strategy, a greater skepticism regarding the benefits to be derived from mergers, and a greater willingness to interfere with incentives created by market forces in either a concentrated or an atomistic market. While federal and state philosophies, as reflected in their respective horizontal merger guidelines, claim to be grounded in and consistent with section 7 of the Clayton Act as reflected in its legislative history and in its interpretation by the Supreme Court, application of the two sets of guidelines may give quite divergent results. Although both claim to increase the certainty with which the business community can assess the legality of potential mergers and acquisitions from an antitrust viewpoint, the conflicts inherent in the guidelines actually increase the uncertainty businesses face.

This article describes the differences in philosophies and associated implications. These philosophical differences result in contrasting treatment of the productive efficiencies offset to increasing market power, treatment of allocative efficiency issues, and treatment of evidence of anticompetitive and procompetitive effects of a merger. The philosophical differences result both in different standards for when a merger will be challenged and different interpretations and receptivity to evidence presented in the defense of mergers once challenged.

Keywords: antitrust law, mergers and acquisitions, horizontal merger guidelines, consumer welfare, economic efficiency, allocative efficiency, allocative efficiency, productive efficiency, Clayton Act