Sometimes a false narrative is repeated so often that people accept it as true. This has been the situation with mergers in the US, where numerous government officials, some academics, and others have accepted and repeated a narrative that merger oversight has grown weak since the 1980s, resulting in increased industry concentration and market power.

Unfortunately, apparently no one thought to check the data…until now. A new study measures how judicial standards in merger cases have changed over the past four decades and reveals that these standards have become more pro-enforcement—exactly the opposite of the accepted wisdom.

The false narrative appears to have emerged from an effort to discard the work of the Chicago School, a group of economic and legal scholars who shaped antitrust thinking in the 1980s. These scholars’ work led the development of rigorous analytical approaches to antitrust questions and found that much of what passed for received wisdom from the Louis Brandeis era was false. For example, it was generally accepted before the 1970s that greater market concentration meant that the larger firms exercised market power. The economists showed that the larger firms were large because they were more efficient than their smaller brethren. It was also received wisdom that advertising protected entrenched firms from competition. But the Chicago School’s careful research found that advertising was often procompetitive.

Their studies led to the development of the consumer welfare standard, which holds that antitrust should be about benefitting consumers, not adhering to arbitrary standards or protecting inefficient businesses as happened in the infamous Brown Shoe case. This redirection took hold and became the foundation for rigorous economic tools used to analyze mergers.

For various reasons, some of which remain unclear, numerous people gradually started believing that the rise of economic analysis in antitrust meant a decline in merger enforcement. In 2008, two respected antitrust experts criticized courts for being too ready to accept what these experts called “unproven noninterventionist economic arguments about concentration, entry and efficiencies.” Other scholars argued that the Chicago School ideas made it harder for antitrust agencies to challenge anticompetitive mergers. Another concluded that courts escalated the standard of evidence required to reject a proposed merger.

President Joe Biden and his antitrust team fell in line with this false narrative. In signing his executive order on antitrust, the president called the past 40 years of antitrust a failed “experiment of letting giant corporations accumulate more and more power.” The president’s antitrust advisor, Tim Wu, said the purpose of the executive order was to “turn the page on 40 years” of the “Chicago School-inspired approach fixated on [assessing potential] consumer harms.” Before joining the Biden-Harris administration, Federal Trade Commission chair Lina Khan wrote critically of the Chicago School focus on consumers.

The new study systematically analyzed the evolution of judicial standards for proposed mergers and found that the Chicago School in fact upgraded antitrust enforcement. The study examined 84,985 mergers reported to the agencies from 1982 to 2021 under the Hart-Scott-Rodino Antitrust Improvement Act of 1976. The agencies challenged 1,477 mergers, meaning that one of the agencies petitioned a court to stop the merger. Once a merger is challenged, the merging parties can drop their proposal, negotiate an agreement with the agency that filed the case, or fully litigate. Eighty-six cases were fully litigated.

The study found that the likelihood that agencies would win fully litigated cases rose since the Chicago School’s influence. It also found that the likelihood of challenged mergers proceeding to litigation increased. Both findings indicate a shift towards stricter enforcement standards in the courts.

The study’s findings are consistent with those of an earlier study by some of the same authors. This earlier study found that the intensity of merger challenges increased from 1979 to 2017, and that the rising enforcement did not depend on who was in the White House.

It’s unfortunate that so many academics and government officials have accepted the false narrative, making way for the Biden-Harris administration’s rejection of sound antitrust principles. Perhaps the next administration will return antitrust to rigorous standards.

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