December 2011 Vol. 110 No. 3 THE REVIEW

Rethinking Merger Efficiencies

Daniel A. Crane

The two leading merger systems—those of the United States and the European Union—treat the potential benefits and risks of mergers asymmetrically. Both systems require considerably greater proof of efficiencies than they do of potential harms if the efficiencies are to offset concerns over the accumulation or exercise of market power. The implicit asymmetry principle has important systemic effects for merger control. It not only stands in the way of some socially desirable mergers but also may indirectly facilitate the clearance of some socially undesirable mergers. Neither system explicitly justifies this asymmetry, and none of the plausible justifications are normatively supportable. The most likely positive explanations for the asymmetry stem from institutional frictions between the lawyer and economist classes in the antitrust agencies, self-preservationist biases by antitrust regulators, and misplaced ideological opposition to industrial concentration. In principle, the probability-adjusted net present value of merger risks should be treated symmetrically with the probabilityadjusted net present value of merger efficiencies.

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