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Unpublished Paper
Antitrust More than a Century After Sherman: Why Protecting Competitors Promotes Competition More than Economically Efficient Mergers
University of Dayton Law Review (2009)
  • Andreas Koutsoudakis, St. Thomas University School of Law
Abstract
The evolution of antitrust laws in the United States, from the Sherman Antitrust Act of 1890 to the Hart-Scott Rodino Antitrust Improvement Act of 1976, has been disrupted throughout this country’s history by a dispute as to whether antitrust legislation passed by the United States Congress (“Congress”) should have broad or narrow implications with regards to a merger between two companies. Historically, Congress has enacted antitrust legislation with broad implications, and the United States Supreme Court (“Court”) has applied the legislation narrowly. Thus, disagreement between these two branches of the United States government has existed, creating an obstacle to the evolution and effectiveness of antitrust laws in this country. Although disagreement has existed as to the extent to which antitrust laws should be applied, the goal of antitrust legislation has been unanimously agreed upon by the two branches. That goal is to promote competition, in order to provide consumers with the lowest priced and highest quality goods. As such, antitrust laws are primarily concerned with preventing those mergers which have an anticompetitive effect. There are three distinct forms of mergers: vertical, horizontal, and conglomerate. As discussed later in this Article, of the three types of mergers, horizontal mergers present the clearest threat to competition. As such, they have historically been the main target of antitrust enforcement. This Article focuses on the dispute as to whether antitrust legislation should have broad or narrow applications with regards to horizontal mergers. With regards to this dispute, those in favor of narrow application of the antitrust laws argue against broad application because it is overinclusive. They claim some horizontal mergers which present anticompetitive effects may also exhibit procompetitive effects, and should therefore be permitted and not enjoined. Broad application is, therefore, overinclusive in the sense that it prohibits many procompetitive mergers, and not only those which are anticompetitive. Thus, those on this side of the debate favor narrow application, in an effort to permit those mergers whose procompetitive effects outweigh the anticompetitive effects. Of the different procompetitive effects claimed by the proponents of limited or narrow application of the antitrust laws, economic efficiency is the one most often debated. Those in favor of narrow application argue economically efficient mergers are procompetitive, since the merger allows the post-merger firm to produce its product at a lower cost, whereby allowing the firm to lower the price consumers pay for these goods. Thus, they argue against broad application, since such an application does not take into account the economic efficiency of the merger, whereas a narrow application allows for consideration of such procompetitive effects. Those on the opposite side of this debate argue in favor of broad application of the antitrust laws, claiming it is the best approach to ensuring all anticompetitive effects are prevented. Although economic efficiency may promote competition in the sense argued by those in favor of a narrow application, it neglects the historic and long-lasting concerns of the American people and Congress that large companies will eventually gain too much market power and ultimately control America. As such, they argue against a narrow application of the laws, since such an application does not address these concerns, and is therefore underinclusive. Based on the historical concerns of antitrust, they argue only an overinclusive approach ensures all of the anticompetitive effects of horizontal mergers are prevented, and that a narrow approach to horizontal mergers fails to address other fundamental antitrust concerns. Thus, a broad application is necessary so that all of the anticompetitive effects of horizontal mergers are prevented. Congress has repeatedly attempted to address this fear of domination by large companies by enacting broad legislation to ensure all anticompetitive mergers are enjoined. In fact, Congress enacted new legislation, or amended previous Acts, about every twenty years to clarify this concern. However, every time Congress enacts legislation to address the antitrust concerns inherent in market control by large companies, the Court limits the legislation’s reach by applying the relevant antitrust legislation narrowly. This causes Congress to respond by enacting new legislation to broaden the reach of antitrust laws so the threat of large company domination may be better addressed. Such legislation is again met with judicial opposition in the same manner as before. As such, Congress desired broad application of the antitrust laws, since only broad application protects competitors as well as promotes competition. In sum, the issue is whether broad or narrow application of the antitrust laws is the best method by which to achieve the antitrust goals desired. This Article addresses this issue in four parts. Since an understanding of the anticompetitive effects inherent in horizontal mergers is necessary for a better examination of the relevant antitrust concerns, Part I of this Article will explain horizontal mergers, and discuss both the anticompetitive and the procompetitive effects which may result. Part II of this Article will then examine the dispute regarding the application of the antitrust laws, as well as the evolution of the horizontal merger analysis, by chronologically evaluating the actions taken by each side of the dispute. The focus will be on the actions taken by each side of the debate, and the constant shift from broad back to narrow application of the antitrust laws. Part III will examine the current approach to reviewing horizontal mergers applied by the Court, and the inconsistent approach taken by the federal agencies authorized with the power to enforce the antitrust laws. Here, the factors evaluated to determine whether or not to enjoin a horizontal merger will be reviewed, distinguishing those which are binding on the Court from those which are not. Since the trend is towards an emphasis on the non-binding factors, the implications of this trend on the dispute will be discussed in Part IV. Additionally, the reasons for a return to an emphasis on the binding parts will also be discussed, explaining why broad application of antitrust laws achieves the goals of antitrust without neglecting other antitrust concerns and American values along the way. Thus, these arguments will be made to support enactment of new legislation by Congress to ensure the effectiveness of the antitrust laws. Part V will conclude this Article by explaining how the arguments presented are in agreement with Congressional concerns and in the best interest of consumers. Further, just as Congress enacted legislation in the past to respond to the Court’s decisions, it should do the same in light of the wave of mergers in the past decade and the growing trend towards an analysis of mergers which is contrary to congressional goals.
Keywords
  • economically efficient,
  • merger,
  • mergers,
  • competition,
  • antitrust,
  • Sherman,
  • Clayton
Publication Date
2009
Citation Information
Andreas Koutsoudakis. "Antitrust More than a Century After Sherman: Why Protecting Competitors Promotes Competition More than Economically Efficient Mergers" University of Dayton Law Review (2009)
Available at: http://works.bepress.com/andreas_koutsoudakis/1/