The Efficiencies Defense in the 2010 Horizontal Merger Guidelines

We analyze the efficiencies defense that is contained in the 2010 Merger Guidelines, which provides the most current statement of the Agencies?? enforcement philosophy and procedure. Most of our attention centers on efficiencies in production, but we also address merger-specific efficiencies that may lead to improved product quality, enhanced services, or even to the introduction of entirely new products. We begin with the analytically clean case of merger-specific efficiencies that are accompanied by monopoly power. From the perspective of either consumer welfare or social welfare, this presents the welfare analysis that should guide merger policy. We, then, examine the errors that may arise due to the restricted role that efficiencies play in Section 7 enforcement. Finally, we close with some policy recommendations.