This Chronicle addresses the failing firm defense in merger control. The failing firm defense is frequently invoked, but is seldom successful.
In theory, at least, the defense has a certain intuitive appeal. By definition, for a merger to be illegal, its implementation must substantially lessen (or “significantly impede”) competition. If, in the counterfactual, the acquired firm would simply go out of business, there can be no lessening of competition. But, in reality, acquirers of viable firms have an incentive to exaggerate the woes of the target to receive approval.
As such, enforcers and courts worldwide set a high bar for a failing firm defense to be accepted. Yet this does not mean that the defense is a dead letter. In certain (rare) circumstances, the defense has been successful. In the wake of the COVID-19 pandemic, the specter of mass bankruptcies (and, hence, the failing firm defense) is raising its head once more.
The articles in this Chronicle critically assess the failing firm defense in its various incarnations around the globe. The perspectives offered by the authors will be invaluable to the evaluation of the future of the failing firm defense as it is inevitably raised with greater frequency in the current economic context.
Lastly, please take the opportunity to visit the CPI website and listen to our selection of Chronicle articles in audio form from such esteemed authors as Maureen Ohlhausen, Herbert Hovenkamp, Richard Gilbert, Nicholas Banasevic, Randal Picker, Giorgio Monti, Alison Jones, and William Kovacic among others. This is a convenient way for our readers to keep up with our recent and past articles on the go, in the gym, or at the beach.
As always, thank you to our great panel of authors.