The 2023 Merger Guidelines: A Post-Chicago and Neo-Brandeisian Integration

This article is designed to explicate the somewhat misunderstood analysis in the 2023 Merger Guidelines (MGs) and situate the MGs in the context of the legal as well as economic environment in which they operate. The MGs refine economic analyses in previous MGs, renew emphasis on certain competitive concerns and approaches, and add several emerging new competitive issues. They also integrate certain goals of post-Chicago and Neo-Brandeisian approaches to merger analysis. The MGs integrate the economic analysis into the traditional legal structure of the “prima facie” and “rebuttal” evidentiary stages and place greater weight on avoiding false negatives over false positives in various places, which is a principal element in both post-Chicago and Neo-Brandeisian approaches. An important theme that runs through the 2023 MGs is that competitive effects analysis should not be limited to static competitive effects analysis of the immediate unilateral or coordinated price effects of a merger. They stress that the analysis should also account for the dynamic effects that result from the change in market structure that follows from the merger as well as the changes in the incentives of the firms. As in the seminal Spence-Dixit models, the entrant would rationally anticipate that the lower marginal costs of the merged firm could produce more intense post-entry price competition and a higher likelihood that the entry would be unprofitable. Thus, higher barriers to entry or expansion may result, which means that the merged firm’s rebuttal burden of production under the sliding scale should be increased accordingly under the decision theory risk analysis that places greater weight on avoiding false negatives.