Mergers and the Market for Corporate Control

IN RECENT years many of the traditional economic justifications of our antitrust laws have been seriously questioned. A new sophistication has developed, and economic activities frequently held illegal by the courts are now thought by many to be consistent with our antitrust goals. The rules against tie-ins, vertical mergers, predatory competition, among others, have to a greater or lesser degree had their theoretical foundations considerably weakened. Recently even cartels, the most venerable victim of American antitrust laws, have found their near champion.2 One practice, however, remains generally condemned in both the economic literature and the most recent Supreme Court rulings. Mergers among competitors would seem to have no important saving grace. The position has gained considerable legal currency that any merger between competing firms is at least suspect and perhaps per se illegal. The latter result seems especially likely when one of the combining firms already occupies a substantial position in the relevant market. Antitrust problems in the merger field seem more and more to be confined to discussions of relevant product and geographic markets and perhaps to the issue of quantitative substantiality.3 Presumably there is still a so-called failing-company defense to an illegal merger charge. The announced justification for this doctrine was that, if indeed the merged company was failing, then it was not actually a competitor in the industry.4 But there are strong suggestions that even that defense may be unavailable when a large corporation is making the acquisition, or when there is any chance of absorption by a non-competing firm, or when the acquired company has not "failed" enough.5