The Horizontal Merger Guidelines (“Guidelines”), issued jointly by the U.S. Department of Justice and the Federal Trade Commission (collectively, “Agencies”), at section 10, states that “[t]he Agencies will not challenge a merger if cognizable efficiencies are of a character and magnitude such that the merger is not likely to be anticompetitive in any relevant market.” The Guidelines go on to make clear that “[t]he greater the potential adverse competitive effect of a merger, the greater must be the cognizable efficiencies, and the more they must be passed through to customers, for the Agencies to conclude that the merger will not have an anticompetitive effect in the relevant market.”

However, to be credited by the Agencies, the efficiencies must, among other things:

  1. be merger-specific (i.e., the result of the transaction and not likely to occur in the absence of the transaction or as a result of some lesser restrictive transaction),
  2. be subject to verification by the Agencies,
  3. not be vague or speculative,
  4. not be the result of anticompetitive reductions in output or service, and
  5. be assessed net of the cost required to achieve the efficiencies.

Even with sizable efficiencies, the Agencies have made clear that “[e]fficiencies almost never justify a merger to monopoly or near-monopoly.”