Thursday, September 9, 2021
U.S. antitrust law empowers enforcers to review pending mergers that might undermine competition. But there is growing evidence that the merger-review regime is failing to perform its core procompetitive function. Industry concentration and the power of dominant firms are increasing across key sectors of the economy. In response, progressive advocates of more aggressive antitrust interventions have critiqued the substantive merger-review standard, arguing that it is too friendly to merging firms. This Article traces the problem to a different source: the merger-review process itself. The growing length of reviews, the competitive restrictions merger agreements place on acquisition targets during review, and the targets’ resulting loss of strength harm competition and consumers. As a result, an enforcement regime designed to protect competition is damaging it instead. The rise of antitrust reverse termination fees (“ARTFs”)—payments from the acquirer to the target if the merger fails antitrust review—demonstrates the anticompetitive effect of the review process. This Article argues that these fees represent the parties’ negotiated prediction of the competitive costs to the target of entering the merger agreement (and therefore the competitive gains to the acquirer and other rivals in the relevant market). ARTFs also indicate the possibility of anticompetitive manipulation of the merger-review process. Knowing that reviews sometimes take over a year to resolve, acquirers can enter a merger agreement and use an ARTF to buy competitive peace—even when they expect the merger will be rejected—all the while harming consumers. Reform proponents have suggested several ways potentially to shorten merger investigations, such as limiting enforcement agencies’ discovery demands, but these modifications only reduce the problem at the margins. This Article proposes a more effective reform: a requirement that the antitrust enforcement agencies announce a group of highly concentrated markets in which they will challenge any proposed merger, unless one of the firms is failing. This strategy, which the antitrust agencies have employed in an ad hoc fashion in the past, will discourage anticompetitive mergers and eliminate lengthy reviews that harm consumers.