The evolution of judicial standards: Evidence from litigated merger trials

Click here to read the full article online

Have judicial standards applied to merger challenges become increasingly lenient over time? To evaluate this question we first examine developments in merger enforcement over time. We find that those developments do not provide an unambiguous answer. Given this ambiguity, the paper develops a theoretical model to capture the essence of the interplay among merging firms, antitrust authorities and the courts. The model yields clear predictions on shifts in judicial standards from the outcomes of both litigated mergers cases and those that settle prior to trial. The paper then provides an empirical investigation of litigated merger outcomes based on the population of all merger challenges in the United States over 1979-2019. This analysis reveals that judicial standards have shifted in favor of the antitrust agencies over time. The probability that merger challenges proceed to trial has declined over time while the probability that antitrust agencies win trials has increased over time — both results are indicative of judicial standards applied to merger challenges that have grown increasingly pro-enforcement over time.