Outside in or Inside Out?: Counting Merger Efficiencies Inside and Out of the Relevant Market

Abstract

Despite relatively successful efforts to modernize the analytical approach for assessing the potential anticompetitive effects of a merger in the United States, antitrust doctrine and agency practice unfortunately have not similarly incorporated advances in economics with respect to the analysis of efficiencies justifications. Current antitrust doctrine and agency practice in the United States permits the antitrust agencies to challenge, and the federal courts to block, a transaction when there is a substantial risk that the merger may cause anticompetitive harm in one market even when those harms are far outweighed by efficiencies benefits in another market. Rejection of out-of-market efficiencies is an obsolete approach to a welfare-based antitrust regime that was born out of an era in which efficiencies justifications in merger cases generally were viewed with considerable skepticism.. In this contribution to a tribute to William E. Kovacic, who both as a scholar and public servant studied how enforcement programs are shaped by the evolution of antitrust norms, we discuss the evolution of the treatment of out-of-market efficiencies in the United States and around the world, and we argue that the United States courts and antitrust agencies should update antitrust doctrine and agency practice to require a serious and committed consideration of out-of-market efficiencies.