Last week’s coverage of the pending purchase of NBC by cable giant Comcast reminded me of Jamie Moffitt’s paper presented at the Works in Progress conference last month. Jamie’s article, entitled Merging in the Shadow of the Law: Why Judicial Efficiency Analysis Matters examines current judicial interpretation of Section 7 of the Clayton Act through the lens of negotiation theory. The research exposes a gap between how courts say they are analyzing efficiency claims in Section 7 Clayton Act enforcement actions and what they are actually doing. During periods of lax antitrust enforcement (like the last eight years), this pattern is not readily visible, since almost all proposed merger and acquisition (“M&A”) deals are approved. With a shift to more aggressive antitrust policy (likely to happen more now), however, it is critical that merger review include appropriate weighting of transaction-generated efficiencies. Although only a small number of Section 7 cases are litigated each year, corporate negotiators assess thousands of potential M&A deals annually.
For decades, scholars have applied microeconomic models to analyze antitrust policy. This article applies analytical frameworks from the negotiation literature to demonstrate how in an environment of increased enforcement, current judicial efficiency analysis would discourage corporate negotiators from pursuing efficient deals, thereby hurting the competitiveness of U.S. companies and markets.
I do not pretend to understand the intricacies of antitrust last but I will say that Jamie’s presentation made this both interesting for me and insightful. As the Obama administration is more than likely to increase antitrust enforcement, Jamie’s analysis will become even more fruitful. And, as the NBC-Comcast deal points out, this topic is timely too!