Role of Economists Before the Agencies and in Court

• Pages: 483-502

483

CHAPTER XIII

ROLE OF ECONOMISTS BEFORE THE AGENCIES

AND IN COURT

Over the past three decades, merger practice before the agencies and

the courts has entailed the application of legal and economic analysis to

the facts presented in a particular transaction. As discussed in the earlier

chapters of this Handbook, both the agencies and the parties typically

have economists working with the lawyers. Part A of this chapter will

focus on the role the economists perform throughout the review process

and in any court challenge of the merger. Part B discusses the influence

of economic analysis in merger review. Expanding on this discussion,

part C identifies the benefits of involving economists early in the

process. Parts D and E discuss the roles of economists before the

agencies and in court, respectively, and best practices to succeed in these

roles. Part F discusses economists’ roles in the special case of merger

review postconsummation, and part G discusses international

cooperation and the role of economists in merger review.

A. Why an Economist and Which Kind Do You Need? Introduction

to the Role of Expert Economists in Merger Review

The intent of merger review by the Federal Trade Commission (FTC

or Commission) and the Antitrust Division of the U.S. Department of

Justice (DOJ or Antitrust Division) is that “mergers should not be

permitted to create, enhance, or entrench market power or to facilitate its

exercise.”1171 Whether a merger is likely to result in such an exercise of

1171. See U.S. DEP’T OF JUSTICE & FTC, HORIZONTAL MERGER GUIDELINES

(2010), reprinted in Trade Reg. Rep. (CCH) ¶ 13,100 (2010) (Horizontal

Merger Guidelines). The Horizontal Merger Guidelines are also available

at the Web sites of the FTC and the Antitrust Division, respectively. See

http://www.ftc.gov/os/2010/08/100819hmg.pdf; http://www.justice.gov/

atr/public/guidelines/hmg-2010.html. The Horizontal Merger Guidelines

reflect considerable input from agency economists and extensively

discuss the types of empirical and economic analysis that may be used in

any particular merger. In addition, the FTC has on its web site “best

484 The Merger Review Process

market power is fundamentally an economic question and, thus, merger

review is—as are antitrust cases generally—heavily dependent on both

economic theory and analysis.1172

To undertake economic analysis to evaluate the likely competitive

effects of a merger, the Antitrust Division and the FTC’s Bureau of

Economics employ approximately sixty and seventy full-time Ph.D.

economists, respectively.1173 Economists at the agencies may explore a

variety of potential theories of competitive harm when investigating a

merger. Decision making at the agencies is typically based on the

application of empirical economic analysis to such theories. The agencies

emphasize “hard facts”1174 to undertake “a dispassionate, scientific

evaluation of the evidence,”1175 and such evidence may include empirical

practice.” FED.TRADE COMM’N, BEST PRACTICES FOR DATA, AND

ECONOMICS AND FINANCIAL ANALYSES IN ANTITRUST INVESTIGATIONS

(FTC BE Best Practices), available at http://www.ftc.gov/be/ftcbebp.pdf.

1172. See, e.g., Abbott B. Lipsky, Jr., Antitrust Economics: Making Progress,

Avoiding Regression, 12 GEO.MASON L. REV. 163, 167 (2003) (stating

that “there is no longer any serious debate in U.S. antitrust that policies

and rules must be formulated in terms of their ultimate effect on long-run

economic performance—whether that performance is measured precisely

by total surplus, long-run productivity growth or some other objective

quantity…. To return to Baxter’s maxim, whatever the rule or policy

under scrutiny, in modern antitrust, ‘if it doesn’t make economic sense, it

doesn’t happen’ [citation omitted].”).

1173. Lawrence J. White, “The Growing Influence of Economics and

Economists on Antitrust: An Extended Discussion,” Economics, 5

Management, and Financial Markets, March 2010. The Bureau of

Economics at the FTC also supports the Commission’s activities in

consumer protection.

1174. David Scheffman, Director, Bureau of Economics, Fed. Trade Comm’n,

Sources of Information and Evidence in Merger Investigations: An FTC

Economist’s View, Remarks to a session on “The Use of Economics in

EC Competition Law,” delivered in Brussels, Belgium (Jan. 2003),

available at http://www.ftc.gov/speeches/other/sourcesofinfobrussels03.

pdf (stating that the agencies “focus on … ‘hard’ facts, i.e., facts that can

be developed by ‘hard’ evidence, such as quantitative data”).

1175. Michael R. Baye, Director, Bureau of Economics, Fed. Trade Comm’n,

The Role of Economists in Antitrust: Getting the Most from Your

Economic Expert, Prepared Remarks before the Economics and Federal

Civil Enforcement Committees of the ABA’s Antitrust Section Brownbag