For Welfare's Sake? Balancing Rivalry and Efficiencies in Horizontal Mergers

Abstract

There has been an extensive debate about whether the proper objective of merger control should be long run consumer welfare or long run total welfare. We review the various arguments that have been put forward to justify the use of a consumer welfare standard and find none of them convincing. However this debate risks missing the point. Maximizing long run total welfare may be a suitable objective for governments enacting merger control legislation. But the long run effects of a merger are often too complex for this to serve as a practical guide to decision making. Instead, competition authorities are usually given a target related to competition, allowing for some consideration of efficiencies. In practice this target is often interpreted as a focus on the short term effects on consumers, so that efficiencies count only to the extent that benefits are passed on. The real debate is not about the objective of merger control, but about whether this is the right target.