Thirteen Sets of Observations/Recommendations Pertinent to the Revision of the DOJ/FTC (M&A) Guidelines

AuthorRichard S. Markovits
Published date01 June 2023
Date01 June 2023
Subject MatterArticle
The Antitrust Bulletin
2023, Vol. 68(2) 318 –358
© The Author(s) 2023
Article reuse guidelines:
DOI: 10.1177/0003603X231162997
Thirteen Sets of Observations/
Recommendations Pertinent to the
Revision of the DOJ/FTC (M&A)
Richard S. Markovits*
This Article provides recommendations both for improving the accuracy of applications of the Sherman
Act and Clayton Act to mergers and acquisitions (M&A)s and for creating morally-desirable (M&A) policies.
It defines the specific-anticompetitive-intent and lessening-competition tests of illegality that current U.S.
antitrust law applies to (M&A)s; explains why neither classical economic markets nor antitrust markets can
be defined non-arbitrarily, and why it is therefore inaccurate and unconstitutional to use market-oriented
approaches to analyzing the illegality of (M&A)s under current U.S. antitrust law; outlines appropriate
non-market-oriented protocols for determining the illegality of (M&A)s under the Sherman and Clayton
Acts—whether the (M or A) was motivated by specific anticompetitive intent or would tend to lessen
competition; delineates the liberal conception of justice and various egalitarian conceptions of the moral
good and argues that in the U.S. those moral norms should be used to evaluate antitrust policies; outlines
the protocol that is economically efficient to use to predict the economic efficiency of particular (M or
A)s or particular (M&A) policies; and considers the relevance of the economic efficiency and competitive
impact of any (M or A) or any (M&A)-focused antitrust policy for its moral desirability.
antitrust-policy-relevant moral norms, competitive-impact-analysis protocol, economic-efficiency-
impact-analysis protocol, moral relevance of economic-efficiency/seller-competition impacts, tests of
antitrust illegality
The Department of Justice (DOJ) and Federal Trade Commission (FTC) recently published a Request
for Information pertinent to their prospective revision of their merger-and-acquisition (M&A) guide-
lines. This Article is an extended, reformatted, footnoted variant of my response to the “Agencies’”1
*School of Law, The University of Texas at Austin, Austin, TX, USA
Corresponding Author:
Richard S. Markovits, Texas School of Law, 727 East Dean Keeton St., Austin, TX 78705, USA.
1162997ABXXXX10.1177/0003603X231162997The Antitrust BulletinMarkovits
1. I have enquoted “Agencies” because the Antitrust Division of the Department of Justice is not an “agency.” The text that
follows will not enquote the word “Agencies.”
Markovits 319
Request. It contains thirteen sets of observations/recommendations that relate to the interpretation and
application of the Sherman Act2 and Clayton Act3 that are correct as a matter of law and/or to the gov-
ernment treatment of (M&A)s that would be normatively best.
I. The Difference between Antitrust Law Analysis and Antitrust
Policy Analysis in the United States
In the United States, there is a difference between the analysis of antitrust law and the analysis of
antitrust policy. This difference exists because the U.S. antitrust laws promulgate judicially cogni-
zable tests of illegality that do not make the illegality of any exemplar of covered conduct depend
entirely on its moral undesirability or the moral desirability of prohibiting it.4 The Sherman Act
promulgates a “specific anticompetitive intent” test of illegality, which prohibits covered con-
duct—all business conduct with the possible exception of unsuccessful attempts to enter into con-
tracts in restraint of trade5 and efforts to influence government decisions without lying or paying
supposedly independent experts to support one’s positions without revealing that they have been
paid to do so6— if its perpetrator’s or perpetrators’ ex ante perception that the conduct would be at
least normally profitable was critically affected by its/their perception that the conduct would or
might reduce the absolute attractiveness of the best offers against which the perpetrator(s) would
have to compete in one or more ways that would render the conduct profitable although it would be
economically inefficient in an otherwise-Pareto-perfect economy.7 With one empirically unimportant
2. Sherman Act, 26 Stat. 209 (1890) (codified as amended at 15 U.S.C. Sections 1-11).
3. Clayton Act, 28 Stat. 730 (1914) (codified as amended at 15 U.S.C. Sections 12-27).
4. For my reasons for interpreting the Sherman and Clayton Acts to promulgate the tests of Illegality the text that follows
claims they, respectively, promulgate, see RichaRd S. MaRkovitS, EconoMicS and thE intERpREtation and application
of U.S. and E.U. antitRUSt law: vol. i BaSic concEptS and EconoMicS-BaSEd lEgal analySES of oligopoliStic and
pREdatoRy condUct (2014)—hereinafter MaRkovitS, vol. I, 73–78 and 86–94 (2014).
5. Here is the explanation for this possible exception. Section 1 of the Sherman Act does not explicitly cover “attempts” to
enter into contracts, combinations, or conspiracies in restraint of trade. U.S. federal law does not contain a general “attempt
provision”—that is, a provision that declares illegal unsuccessful attempts to engage in conduct whose successful comple-
tion is prohibited. In general but particularly when the relevant statute declares covered conduct criminal (as the Sherman
Act does), U.S. federal courts refuse to read attempt provisions into federal statutes that do not contain them even when
there is no possible justice or moral-good justification for not prohibiting the relevant unsuccessful attempts (because of a
concern that reading an attempt provision into a federal statute that does not contain one will deprive potential defendants
of fair notice). Admittedly, Section 2 of the Sherman Act prohibits not only monopolization but also attempts to monopo-
lize. However, although most antitrust law scholars with whom I have discussed this issue say that they have no doubt
that it would be correct as a matter of U.S. law and/or desirable for judges to conclude that Section 2 covers unsuccessful
attempts to enter into or participate in contracts, combinations, or conspiracies in restraint of trade, the constitutional law
and criminal law scholars to whom I raised this question are equally confident that it would be incorrect as a matter of U.S.
law and morally undesirable for courts to circumvent Section 1’s failure explicitly to cover unsuccessful attempts to enter
into or participate in contracts, combinations, or conspiracies in restraint of trade by interpreting Section 2 to cover such
unsuccessful attempts. I should add that the relevant constitutional law and criminal law scholars were also confident that
federal court judges would not interpret Section 2 to cover such unsuccessful attempts.
6. The explanation for this possible exception is that (1) relevant actors have a constitutional right to participate in gov-
ernment-decision-making processes in the referenced way, (2) the Sherman Act would therefore be unconstitutional if it
prohibited persons or firms from doing so, and (3) federal courts would therefore execute a “saving construction” of the
Sherman Act that exempts the referenced conduct from its coverage. See also Footnote 13 infra.
7. The Pareto-optimal conditions are conditions whose universal fulfillment guarantees that—even if resources could be real-
located without generating any allocative transaction costs (without using up any resources)—no reallocation of resources
could make some relevant creature better-off without making any relevant creature worse-off. There are seven Pareto-optimal
conditions: perfect competition among sellers, perfect competition among buyers, no (real) externalities, no taxes on the mar-
gin of income, all resource allocators are sovereign—possess all the information they require to make choices that are in their
interest as they perceive it, all resource allocators maximize, and no sale generates any buyer surplus. The last clause of my
definition of conduct that is motivated by specific anticompetitive intent is included to prevent choices to make an investment
320 The Antitrust Bulletin 68(2)
exception—Section 2(f),8 the Clayton Act promulgates a “lessening competition” test of illegality,
which prohibits covered conduct if it is sufficiently likely to impose a (substantial) net equivalent-
dollar loss on the customers of the perpetrator(s) and its (their) product rivals by reducing the abso-
lute attractiveness of the best offers they, respectively, receive from any supplier that is not privately
best-placed to supply them.9 (It may be that, given U.S. industrial policy as a whole,10 it would be
(1) that the investor would not have perceived ex ante to be at least normally profitable had it not believed that the investment
would deter a rival investment but that the investor did not perceive itself ex ante to have a critical monopolistic investment-
incentive to make from being deemed to be motivated by specific competitive intent. A potential investor will perceive itself
to have a monopolistic investment-incentive to make an investment if it believes that its investment will lower the profits its
other investments in the relevant portion of product-space will yield by competing against them and by inducing rivals to make
non-retaliatory responses to the investment in question by less than those profits would be reduced in analogous ways by the
rival investment it believes the investment in question would deter.
8. Section 2(f) of the Clayton Act declares it illegal for a buyer “knowingly to induce or receive a discrimination in price”
(in Clayton Act terms, a lower price than others are charged) when its doing so either lessens competition or injures one or
more of the relevant buyer’s rivals. Therefore, Section 2(f) promulgates an injury-to-competitor test as well as the lessening
competition test that the other relevant provisions of the Clayton Act promulgate. I doubt the empirical significance of this
injury-to-rival test because I suspect that sellers will rarely give price concessions to a buyer when the price concession
would injure a rival of the buyer (that would presumably also be a potential customer of the seller) since doing so would
increase the favored customer’s future buying power vis-à-vis the seller.
9. The text does not address four issues that relate to the Clayton Act’s test of illegality. The first three of these issues relate to
the fact that the Clayton Act declares covered conduct illegal if its “effect . . . may be substantially to lessen competition or
tend to create a monopoly” either “in any line of commerce” or “in any line of commerce in any section of the country”
(emphases added). This first issue is the meaning of “may be.” How high must the probability be that the conduct in question
will lessen competition or tend to create a monopoly for the conduct to be Clayton-Act-violative on that account? As an
economist, I am not satisfied with “reasonable possibility” operationalizations. I think a number should be assigned to the
relevant critical probability. The second issue is the meaning of “substantially”: Does that concept refer, for example, to an
absolute dollar-amount, a ratio of the equivalent-dollar loss predicted to be imposed on Clayton-Act-relevant buyers to the
dollar-volume of the sales that the firm that results from the (M or A) makes in the “relevant market,” or the ratio of the
relevant loss to the dollar-volume of all sales made in the “relevant market”? I will return to this issue below. The third issue
relates to the word “any.” If the conduct alleged to violate the Clayton Act is sufficiently likely to impose a sufficient sub-
stantial equivalent-dollar loss on buyers in one or more lines of commerce or in one or more sections of the country but will
not impose a net equivalent-dollar loss on all Clayton-Act-relevant buyers (on all buyers in all “directly”-affected lines of
commerce and sections of the country), does the conduct violate the Clayton Act? My judgment is that the answer to this
question that is correct as a matter of law is “No.” I offer two justifications for this legal conclusion: (1) except when the issue
is the legal appropriateness of reading attempt-provisions into statutes or regulations, U.S. courts generally interpret legisla-
tion to make it best achieve its promulgators’ goals, and the (proximate) goal of the Clayton Act (it seems to me) is to prevent
Clayton-Act-relevant buyers from suffering equivalent-dollar losses for the proscribed reason, and (2) there is no non-arbi-
trary way to define a relevant “line of commerce” or “section of the country,” and, given that reality, any interpretation of the
Clayton Act that makes the definition of these concepts critical would render the statute unconstitutional by making its
application arbitrary, thereby depriving potential violators of the statute of the fair notice to which they have a moral and
constitutional right. (See Section 6’s analysis of the inevitable, comprehensive arbitrariness of market definitions.) I should
acknowledge that in one case—United States v. Philadelphia National Bank, 374 U.S. 321, 370–71 (1974)—the Supreme
Court stated that a horizontal (M or A) that did not lessen competition overall would violate the Clayton Act if it lessened
competition in one line of commerce or section of the country and that this position has never been rejected by the Court. In
my contestable judgment, correctly interpreted as a matter of law, the enquoted test of the Clayton Act would be read to
prohibit an (M or A) if the weighted-average loss it was predicted to impose on Clayton-Act-relevant buyers by reducing the
absolute attractiveness of the best offers they, respectively, received from any inferior supplier was sufficiently large to make
it morally desirable (I wish I could supply the required normative criterion) for the (M or A) proposal to be rejected, given
the low probability that the rejection would be challenged in court. The fourth issue that needs to be addressed relates to the
baseline that is correct as a matter of law to use to measure the competitive impact of an (M or A) (or any other conduct
covered by the Clayton Act) in a Clayton-Act case. In Clayton-Act cases, is it correct as a matter of law to measure the
competitive impact of covered conduct by comparing the position in which the conduct at issue would leave Clayton-Act-
relevant buyers with (1) the position in which they would find themselves if the perpetrator(s) did nothing relevant, (2) the
position those buyers would be in if the perpetrator(s) substituted the choice that the perpetrator(s) would find more profit-
able than doing nothing relevant that would confer the largest equivalent-dollar gain on Clayton-Act-relevant buyers, or (3)
the position those buyers would be in if the perpetrator(s) made an exemplar of some other specified choice the perpetrator(s)

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