Balancing Effects Across Markets

• Author: Daniel A. Crane
• Position: Associate Dean, Faculty and Research, and Frederick Paul Furth, Sr. Professor of Law, University of Michigan
• Pages: 397-411

BALANCING EFFECTS ACROSS MARKETS

D

ANIEL

A. C

RANE

*

In Philadelphia National Bank (PNB),

1

the Supreme Court held that it is

improper to weigh a merger’s procompetitive effects in one market against the

merger’s anticompetitive effects in another. The merger in question, which

ostensibly reduced retail competition in the Philadelphia area, could not be

justified on the grounds that it increased competition against New York banks

and hence perhaps enhanced competition in business banking in the mid-At-

lantic region. I will refer to the Supreme Court’s prohibition on balancing

effects across markets as a “market-specificity” rule. Under this rule, efficien-

cies that may counterbalance anticompetitive aspects must be specific to the

market in which the anticompetitive aspects are present.

Although the market-specificity rule is periodically invoked and followed,

its justification is hazy. The Court in PNB provided one justification—con-

cern about a slippery slope to monopoly—that has limited applicability. Other

commentators, particularly the Areeda-Hovenkamp treatise, have provided

more elaborate but equivocal defenses of the rule.

2

For their part, the antitrust

agencies embrace the rule as a baseline, but then leave open the possibility of

waiving it in the exercise of their prosecutorial discretion.

In this essay, I revisit the justifications for the market-specificity rule.

While there is some sense to the idea that merger effects should be analyzed

on a market-by-market basis—particularly given the complexity and adminis-

trative difficulty of comparing effects across markets—the principle is not,

and cannot, sensibly be applied as a strict rule. Rather, the principle is best

operationalized as a presumption against balancing effects across market lines

that can be rebutted based on compelling evidence in particular cases.

* Associate Dean, Faculty and Research, and Frederick Paul Furth, Sr. Professor of Law,

University of Michigan.

1

United States v. Phila. Nat’l Bank, 374 U.S. 321 (1963).

2

4A P

HILLIP

E. A

REEDA

& H

ERBERT

H

OVENKAMP

, A

NTITRUST LAW

: A

N

A

NALYSIS OF

A

NTI-

TRUST

P

RINCIPLES AND

T

HEIR

A

PPLICATION

¶ 972, at 45–49 (3d ed. 2009).

397