WHERE ART THOU, EFFICIENCIES? THE UNCERTAIN ROLE OF EFFICIENCIES IN MERGER REVIEW
By Kaley Fendall and David Maas1
The role of efficiencies in merger review remains unclear. This ongoing uncertainty is interesting given that antitrust has long been a bastion of law and economics. As Richard Posner put it some 40 years ago, "the application of economics to antitrust has never been particularly controversial among economists. Even among academic lawyers, the appropriateness of placing economics in the foreground of antitrust analysis has been generally accepted."2 That has also been true when it comes to courts and enforcers analyzing the anticompetitive effects of a merger. But the answer is not as simple when it comes to assessing a merger’s procompetitive benefits, such as efficiencies. Courts and enforcers have been resistant to accepting efficiencies as a legitimate basis on which to allow an otherwise anticompetitive merger to proceed. This skepticism of efficiencies over the years has resulted in murky jurisprudence and makes it difficult to predict the appropriate weight (if any) that pro-consumer efficiencies are to be assigned in merger analysis.
Given the consensus that antitrust focuses on consumer welfare, it is not surprising that the calls have grown louder for clear recognition of the role that efficiencies play in merger analysis. The Department of Justice’s ("DOJ") Antitrust Division has noted for instance, that "the concepts of economic welfare and economic efficiency are closely related to one another. Economists say that an economy is operating at maximum efficiency when society is squeezing the greatest valueâthe highest level of welfareâ out of its scarce resources."3 In other words, sound antitrust policy promotes allocating resources more efficiently. However, thanks in part to the Supreme Court’s FTC v. Procter & Gamble Co. decision in the 1960s that cast some doubt on the role of efficiencies in merger analysis,4 efficiencies have never found solid footing in antitrust jurisprudence.