The Merger Efficiency Defense: No Legal Basis and a Bad Idea

This article demonstrates that there is not now, and there should not be, an efficiencies rebuttal, defense, or exception in merger cases. A textualist analysis demonstrates that it does not exist in the plain words of the anti-merger statute, which prevents mergers that “may be substantially to lessen competition or to tend to create a monopoly.” The relevant Supreme Court cases explicitly hold that no efficiency rebuttal exists. Although holdings in subsequent lower court cases are mixed, none provided a sound justification for ignoring Supreme Court precedent. The article also shows that antitrust economists have redefined efficiencies in a manner that conflicts with mainstream economic theory. But even under the conventional approach, economic studies show that mergers only extremely rarely result in efficiencies, and there is no evidence that merger efficiencies are ever passed to consumers. For these and other reasons, including the unpredictability, cost, and difficulties of efficiency analysis, sound public policy requires no efficiency rebuttal in merger cases. When the federal antitrust enforcers released their 2023 Merger Guidelines, they shocked the antitrust world by asserting, for the first time in more than forty years, that no efficiency rebuttal is available for mergers challenged under the “tend to create a monopoly” half of the anti-merger statute. Our article demonstrates that not only were the new Merger Guidelines authors correct to do this, but they should also have gone further. They should have abolished the efficiency rebuttal completely, for all corporate mergers.