Out of Market, Out of Mind

• Pages: 547-592
• Date: 01 January 2026
• Published date: 01 January 2026
• Author: Louis Kaplow
• Subject Matter: Administrative & Public Law

OUT OF MARKET, OUT OF MIND

L K*

INTRODUCTION ......................................... 547

I. OUT-OF-MARKET ANTITRUST AND RESOURCE

FLOWS IN A WELL-FUNCTIONING ECONOMY .......... 557

A. R F   W-F E ..... 557

B. O--M A ......................... 562

II. BUT WHAT IS A “MARKET”? .......................... 567

A. W’ M D G  D  I? ....... 568

B. W A M D’ O P? .... 571

III. INSTITUTIONAL CONSIDERATIONS ................... 574

A. A ................................... 574

B. L D ................................... 579

1. Sherman Act Sections 1 and 2 ...................... 579

2. Clayton Act Section 7 ............................ 583

CONCLUSION ........................................... 591

INTRODUCTION

It is sometimes claimed that “out-of-market” benefits do not count in

antitrust, particularly with regard to merger assessment.1 Thus, if a merger

causes a small harm in market A to deliver a huge benefit in market B, it is

prohibited—but it would be allowed if the market happened to be defined

to combine A and B. This notion in merger law receives some support from

Philadelphia National Bank,2 and Clayton Act Section 7’s repeated use of

* Harvard University and National Bureau of Economic Research. I am grateful to Dale

Collins, Daniel Francis, Carsten Koenig, Aileen Nielsen, Vartan Shadarevian, Carl Shapiro,

Steven Shavell, conference and workshop participants, and the editors and referees for help-

ful discussions and comments; Levi Moneyhun and Dina Rabinovitz for research assistance;

and Harvard University’s John M. Olin Center for Law, Economics, and Business for financial

support. Disclaimer: I consult on antitrust matters, and my spouse is a lawyer who has mostly

represented financial services firms.

1 See, e.g., 4A P E. A & H H, A L: A A

 A P  T A ¶972a (2024).

2 United States v. Phila. Nat’l Bank, 374 U.S. 321, 370–71 (1963).

547

“any” might be interpreted in this manner.3 Nevertheless, such a limitation has

not been at the center of merger challenges over the decades, and it does not

seem to have discouraged myriad acquisitions across the economy that would

seem to be within the contemplated prohibition.

Recently, however, the 2023 Merger Guidelines embrace this approach,

reversing course from the 2010 Horizontal Merger Guidelines, which had

indicated a willingness to consider “inextricably linked” efficiencies in other

markets.4 This long-dormant limitation showed further signs of resurgence

in 2024. The decision enjoining the JetBlue/Spirit merger adopts an out-of-

market limitation under which it appears that (hypothetically) the merger

should have been blocked even if it were found likely to result in significantly

lower fares through improved competition for almost all travelers if it also

would modestly raise fares for the select few who fly first class.5 The issue

also arose but was not decided in the government’s Sherman Act Section 2

case challenging practices involving Google Search.6 And the court’s sum-

mary judgment opinion in the Federal Trade Commission’s (FTC’s) challenge

3 15 U.S.C. §18.

4 Compare U.S. D’  J. & F. T C’, M G 32 (2023)

[hereinafter 2023 M G] (“[T]he Agencies will not.. . credit benefits outside

the relevant market that would not prevent a lessening of competition in the relevant market.”),

with U.S. D’  J. & F. T C’, H M G 30 n.14

(2010) [hereinafter 2010 M G] (“In some cases, however, the Agencies in

their prosecutorial discretion will consider efficiencies not strictly in the relevant market, but

so inextricably linked with it that a partial divestiture or other remedy could not feasibly elimi-

nate the anticompetitive effect in the relevant market without sacrificing the efficiencies in the

other market(s).”); see also 2023 M G, supra, at 33 (“To successfully rebut

evidence that a merger may substantially lessen competition, cognizable efficiencies must be of

a nature, magnitude, and likelihood that no substantial lessening of competition is threatened by

the merger in any relevant market.”). The 2004 EU Merger Guidelines, although not addressing

the subject as explicitly, strongly suggest a limitation to in-market benefits. See G

  A  H M U  C R  

C  C B U, 2004 O.J. (C 31) 5, ¶79 (“The relevant

benchmark in assessing efficiency claims is that consumers will not be worse off as a result

of the merger. For that purpose, efficiencies should be substantial and timely, and should, in

principle, benefit consumers in those relevant markets where it is otherwise likely that competi-

tion concerns would occur.” (emphasis added)); see also Jan M. Rybnicek & Joshua D. Wright,

Outside In or Inside Out? Counting Merger Efficiencies Inside and Out of the Relevant Market,

in 2 W E. K: A A T 443, 453–56 (Nicholas Charbit et al. eds.,

2014) (discussing other jurisdictions’ treatment of the issue in merger regulation).

5 United States v. JetBlue Airways Corp., 712 F. Supp. 3d 109, 162–63 (D. Mass. 2024).

The variant in the text that involves lower fares for most and higher fares for first class (which

is analogous to but reversed from the postulated situation in the case itself) is developed in

Section III.B. The 2023 Merger Guidelines, in addressing product repositioning, can be under-

stood to find objectionable a merger that would enable the offering of innovative new products

if that would result in the removal of any previous product variant preferred by any customer

group, regardless of the overall benefits to customers. See 2023 M G, supra

note 4, at39.

6 United States v. Google, 747 F. Supp. 3d 1, 175–76 (D.D.C. 2024). The court stated that

the law was unclear under Sherman Act Section 2, but the question did not need to be resolved

548 A L J [Vol. 87

to Meta’s acquisition of WhatsApp (also under Sherman Act Section 2)

expressed skepticism whether it could consider even large benefits through

improving the target’s capabilities in its own market if there were incidental

and smaller anticompetitive risks in the acquirer’s market, as long as the latter

were more than de minimis.7

Under this view, if a merger would harm some modest group of customers

in some small but distinct “market,” it should be blocked regardless of how

great its benefits are to vastly more consumers in some other market.8 Are we

out of our minds?

Consider some straightforward implications of this logical construct in

settings outside antitrust:

• Should a drug be administered that has a reasonable prospect of saving

the patient’s life? Not if it will cause a rash on some separate part on

their body. Contrariwise: Should we recommend cosmetic surgery

even though it poses a significant risk of killing the patient because that

is an out-of-organ effect and hence should be ignored?

• Should a family move to a safer neighborhood with better schools for their

children? Not if it is too far from the only good bakery. After all, such a

harm should not be balanced against the out-of-neighborhood benefits.

• Should one change jobs for better pay and working conditions? Not if,

unlike the current job, the new one is on the fourth floor and there is no

elevator, a disadvantage that, as a matter of principle, may not be deemed

outweighed by benefits along other dimensions.

because the court found that the defendant had failed to establish the proffered cross-market

benefits. Id.

7FTC v. Meta Platforms, Inc., 775 F. Supp. 3d 16, 69–70 (D.D.C. 2024). The court mysteri-

ously addresses the issue even though “the parties have not briefed this unsettled question,” id.

at69, while citing the FTC’s brief on the matter. See id. at70. It also states that “[t]he weight of

authority nonetheless appears to be broadly against recognizing out-of-market procompetitive

justifications without very good justification,” id. at69, citing a single circuit court case and two

commentaries, after having noted that the Supreme Court had accepted out-of-market benefits

in at least one Sherman Act case (citing NCAA v. Bd. of Regents of Univ. of Oklahoma, 468

U.S. 85, 117 (1984)). The Supreme Court’s more recent decision in NCAA v. Alston, 594 U.S.

69 (2021), can only be understood as predicated on a wholesale rejection of the idea that out-of-

market procompetitive effects are to be ignored. See infra note 66.

8 Although not falling under the out-of-market terminology, some have objected to making

trade-offs across consumers in the same market (for example, making trade-offs over time or

across consumers with different preferences among products deemed to be in the same market).

For discussion of a range of commentary on trade-offs across consumers, see note 17, below.

See also infra note 59 (discussing guidelines under Article 101 of the Treaty on the Functioning

of the European Union (TFEU) that restrict trade-offs across markets unless the same consumers

are involved). The analysis presented throughout this article on the pernicious effects of ignoring

out-of-market benefits is equally applicable to ignoring benefits to different consumers in the

same market.

2026] O  M, O  M 549