Merging in the Shadow of the Law: The Case for Consistent Judicial Efficiency Analysis

By Moffitt, Jamie Henikoff | Vanderbilt Law Review, November 2010 | Go to article overview

Merging in the Shadow of the Law: The Case for Consistent Judicial Efficiency Analysis


Moffitt, Jamie Henikoff, Vanderbilt Law Review


This Article examines current judicial interpretation of Section 7 of the Clayton Act through the lens of negotiation theory. The research exposes a gap between how courts state they are analyzing efficiency claims in Section 7 Clayton Act enforcement actions and what they are actually doing. During periods of lax antitrust enforcement, this pattern is not readily visible, since almost all proposed merger and acquisition ("M&A") deals are approved. With a shift to more aggressive antitrust policy, however, it is critical that merger review include appropriate weighing of transaction-generated efficiencies-something missing from courts' current antitrust analysis. Although only a small number of Section 7 cases are litigated each year, corporate negotiators assess thousands of potential M&A deals annually. For decades, scholars have applied microeconomic models to analyze antitrust policy. This Article applies analytical frameworks from the negotiation literature to demonstrate how, in an environment of increased enforcement, current judicial efficiency analysis would discourage corporate negotiators from pursuing efficient deals, thereby hurting the competitiveness of U.S. companies and markets.

INTRODUCTION

A significant gap exists between how courts say they are implementing Section 7 of the Clayton Act and what detailed case analysis reveals they are in fact doing. The purpose of the Clayton Act is to prevent mergers and acquisitions ("M&A") that may substantially lessen competition or tend to create a monopoly.1 The courts and the federal agencies responsible for enforcing the Clayton Act, however, have also expressly recognized the potential for M&A to contribute positively to competition through merger-specific efficiencies.2 These strategic synergies and cost savings - available only through the proposed merger - enable merging parties to combine to form stronger, more nimble organizations better positioned to challenge market leaders.

This Article examines twenty-five years of Section 7 Clayton Act cases in which efficiency claims were raised. The analysis reveals a disturbing pattern. Although courts claim to be balancing mergergenerated efficiencies with other negative factors affecting market competition, they are not in fact doing so. Rather, courts appear to be making an assessment of the relevant concentration in the applicable market and then allowing that initial assessment to color their recognition of claimed efficiencies. In cases with limited concentration concerns, courts often cite efficiencies as factors contributing to market competitiveness. In cases involving highly concentrated markets, however, courts often discard similar types of efficiencies. No balancing analysis is ever performed.

Such inconsistent judicial treatment of efficiency claims has not presented a significant problem before now because antitrust enforcement has been relatively lax; the vast majority of proposed deals proceed without intervention. With the changing economic3 and political4 climate, however, antitrust policy is likely to shift towards more aggressive enforcement, including increased scrutiny of mergers and acquisitions.5 This impending enforcement shift, combined with the failure of courts to appropriately balance efficiencies in Section 7 cases, threatens to worsen the competitiveness of U.S. corporations and markets. Inconsistent judicial treatment of efficiencies either blocks or discourages M&A deals that could have contributed to increased competitiveness.

This Article argues that if courts do not consistently balance pro-competitive efficiencies against the other anticompetitive effects of proposed M&A deals, corporations facing stricter antitrust regimes will abandon important deals that could have contributed to the competitiveness of the U.S. economy. Part I reviews how courts currently treat efficiency claims. It highlights some key differences between how courts say they are weighing efficiency claims and what an analysis of the case law reveals they are actually doing. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Merging in the Shadow of the Law: The Case for Consistent Judicial Efficiency Analysis
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.