Mark Glick’s research while affiliated with University of Utah and other places

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.

The fundamental originating principle of law and economics (L&E) is that legal decisions should be (and are) based on maximizing efficiency. But L&E proponents do not define “efficiency” in the way agreed to by most economists, as Pareto Efficiency. A Pareto optimal condition is obtained when no one can be made better off without making someone worse off. Pareto Improvements are win-win changes where no losers exist. In the judicial system, however, there are always winners and losers, because under Article III § 2 of the Constitution a legal case does not exist unless there is a justiciable “case or controversy” in need of resolution. Unable to use Pareto Efficiency, L&E scholars have been forced to adopt alternative definitions of efficiency. Most L&E scholars claim to define “efficiency” based on the work of Kaldor and Hicks, but (perhaps unwittingly) instead use a definition of “efficiency” derived from the 19th century idea of consumer surplus, which encompasses L&E notions such as “wealth maximization,” and “consumer welfare” in antitrust. Neither of these alternative definitions is viable, however. Outside of L&E, the Kaldor-Hicks approach has long been recognized to be riddled with logical inconsistencies and ethical failures, and the surplus approach is even more deficient. Remarkably, virtually none of the numerous L&E textbooks even hint at such problems. Critically, all definitions of efficiency improvements in economics are biased in favor of wealthy individuals or firms, either because they are dependent on the status quo ante distribution of assets, or because they bestow large advantages on parties with political influence or who can afford to bring lawsuits quickly. Many L&E practitioners treat efficiency improvements instead as being objectively good, an error revealing that L&E is primarily motivated by its neoliberal policy agenda.