What Structural Presumption? Reuniting Evidence and Economics on the Role of Market Concentration in Horizontal Merger Analysis

I. INTRODUCTION II. THE QUESTION POSED A. Market Concentration Evidence B. The Structural Presumption C. Evidentiary Presumptions 1. Substantive Factual Inferences 2. Rebuttable (Burden-Shifting) Presumptions D. Competing Interpretations III. THE CASE LAW HISTORY A. The 1960s (Philadelphia National Bank) B. The 1970s (General Dynamics) C. The 1980s and 1990s (Baker Hughes) IV. POSITIVE ANALYSIS A. The Probative Value of Market Concentration B. The Form and Procedure of Rebuttal C. The Order of Horizontal Merger Litigation V. NORMATIVE ANALYSIS A. Confusion of Horizontal Merger Analysis B. Undervaluation of Market Concentration Evidence VI. CONCLUSION I. INTRODUCTION The structural presumption is an important but contentious proposition in the antitrust law of horizontal mergers. It stands for the typical illegality of mergers that would combine rival firms with large shares of the same relevant market. The structural presumption is so named because the likely anticompetitive effects of such mergers are in some sense presumed to follow from the change in market structure involved in such consolidations. In one form or another, the structural presumption has undergirded all antitrust analysis of horizontal mergers since at least the early 1960s. Today, the structural presumption is a topic of significant debate. Though well entrenched in legal precedent, the validity and normative desirability of this proposition are increasingly questioned. Proponents argue that mergers leading to strongly concentrated markets tend to lessen competition and harm consumers. On this basis, they support a presumption that mergers leading to highly concentrated markets should generally be prohibited, even if specific theories of competitive harm are not brought forward by the party seeking relief. (1) opponents of the proposition argue that market structure should not be treated as determinative of the competitive consequences of a merger. They propose to eliminate any presumption of harm based on market concentration evidence and would generally require specific theories of harm to be raised as the basis for relief. (2) As things stand, consensus is not forthcoming. Across numerous academic papers, (3) conferences, (4) formal speeches, (5) informal commentaries, (6) administrative statements, (7) and judicial opinions, arguments have been forcefully articulated for and against the structural presumption with little to show for the exercise. The opposing sides are at an impasse, leaving unresolved the current and future significance of the structural presumption. This is an undesirable state of affairs for a proposition fundamental to the basic legality of business transactions that are often valued in millions to billions of dollars. Clarity on the role and relevance of market concentration evidence is attainable, but not by continuing to debate the legal providence of using this evidence as the basis for a presumption of anticompetitive harm. Instead, this Article asks a more basic question: what kind of presumption is it that market concentration evidence supports in the first place? Courts and commentators are often imprecise in their language and procedure when it comes to presumptions, (9) and treatment of the structural presumption is no exception. As this Article shows, debate over the use of market concentration evidence in the antitrust analysis of mergers can be focused--and largely resolved--by simply addressing a latent ambiguity in the conversation to date: namely, what do we mean when we say that evidence of undue concentration supports a presumption of competitive harm? There are two basic possibilities. First, the structural presumption could be a substantive factual inference based on evolving economic theory and independently probative of the competitive consequences of a merger. In this sense, competitive harm is presumed to arise as a logical implication of the increase in market concentration caused by a merger of large rival firms. …