Must-read: William Cavanaugh and Jack Figura: “Merrick Garland on Efficiencies”

Must-Read: William Cavanaugh and Jack Figura: Merrick Garland on Efficiencies: “A Garland appointment would likely be bad news for those who seek to justify mergers based on the efficiencies…

…In 2001 Judge Garland joined an opinion rejecting an efficiency defense in the merger context, and in a different context in a 1987 article, he critiqued an efficiency-based approach to the state action doctrine…. The ‘revisionist’ model of the state action doctrine, as put forth by UCLA law professor John Wiley and Seventh Circuit Judges Richard Posner and Frank Easterbrook, among others… incorporate[d] an ‘efficiency test,’ where a state or local regulation would be subject to federal antitrust scrutiny if it ‘restrain[ed] market rivalry without responding directly to a substantial market inefficiency.’… Garland… criticized the efficiency test as bearing ‘sobering’ parallels to the Supreme Court’s much-criticized decision in Lochner v. New York….

The role of efficiencies continues to be often debated in the merger context, where proponents of mergers have pointed to alleged post-merger efficiencies as a defense against challenges under Section 7 of the Clayton Act.  The Horizontal Merger Guidelines issued by the U.S. Department of Justice and the Federal Trade Commission recognize the role that efficiencies may play…. In 2001, Judge Garland joined an opinion rejecting an efficiency defense in FTC v. H.J. Heinz Co…. cautioned that that any defendant relying on the defense would have to prove ‘extraordinary efficiencies’ that could not be obtained absent a merger and could not rely on ‘mere speculation and promises about post-merger behavior’…