Do Merger Guidelines Revise or Describe Policy : The Case of the 1997 Efficiency Revision

The 1997 Merger Guidelines appeared to significantly expand the role of efficiency considerations in merger analysis. However, it is possible that the revision simply memorialized existing policy and thus served more to improve transparency than reform policy. By combining an existing review of Federal Trade Commission merger studies after the 1997 reform, with a new review of merger studies from the five years prior to the revision, it is possible to shed some light on this question. In general, the FTC efficiency analyses did not change after the reform, and the bulk of the considerations noted in the Guidelines appear in the files over the entire sample period. Only the study of merger specific efficiencies seemed to clearly change in 1997, as the revised Guidelines mandated that alternative methods to achieve the efficiency must be practical given the market considerations. Overall, the impact of efficiencies on the merger challenge decision appeared to date to the arrival of Chairman Pitofsky at the FTC. Interestingly, this change also supported giving consideration to fixed cost savings, but seemed to insist on some evidence of pass-through to consumers for the fixed cost claims to “count.” Finally, the evidence suggests that findings of efficiencies are not always more likely to occur in closed investigations, further suggesting efficiency claims may affect the merger challenge decision in a “close call.”