How Merger Regulation Became Unreasonable and How to Fix It

Sheldon Kimmel

Supreme Court Economic Review, 2015, vol. 22, issue 1, 181 - 205

Abstract: The Clayton Act has been misread as condemning any merger that sufficiently lessens competition in a market, regardless of how greatly it benefits society as a whole. This paper shows that Brown Shoe's introduction of that narrow focus on damage in a market (regardless of the extent of benefits elsewhere) was based on a factual error: Brown Shoe misread a congressional report that was the only source it gave for its erroneous view that Congress did not "adopt a definition of the word 'substantially'" for the Act. On the contrary, we show that in 1950 Congress reenacted the Act's § 7 as "defined by … International Shoe," including International Shoe's view that the Act's word "substantially" banned only mergers that injure the general public. Later Courts and Congresses have not revised this standard. Merger regulation should be made reasonable by overturning Brown Shoe's error since its misreading of the Act necessarily opposes the use of mergers in transferring resources from existing markets into new markets, making it harder to develop new markets, paradoxically restraining the commerce that antitrust laws claim to protect.

Date: 2015
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