Loyola University Chicago Law Journal, Vol. 12, No. 3 (Spring 1981), pp. 361-399


Logic suggests that if an agreement between two direct competitors to end a price war, allocate customers or refuse to deal with a third party is plainly anticompetitive and forbidden under applicable federal antitrust laws, then a complete integration between those same two direct competitors is equally anticompetitive and similarly should be forbidden. At one point, Congress thought so and the Supreme Court so held, notwithstanding the obvious business advantages enjoyed by the integrated company. In recent years, however, Congress, the Supreme Court and many commentators have changed their view of horizontal integration, and it is now reasonably possible for two direct competitors to merge without violating the federal antitrust laws.

Until 1974, the Supreme Court applied section 7 of the post-1950 Sherman Act to horizontal mergers in practically the same manner a sit applied section 1 of the Sherman Act and section 3 of the Clayton Act to tying arrangement cases. In effect, horizontal mergers were held to constitute per se violations of the Clayton Act whenever the defendant had substantial economic power in the relevant market. Moreover, defendants generally were precluded from introducing collateral evident relevant to "reasonableness" or so-called "competitive realities" to rebut the merger challenged.

The Burger Court's 1974 decision in United States v. General Dynamics Corp., dramatically changed horizontal merger litigation in favor of defendants. Courts now seem to be applying a de facto Sherman Act "rule of reason" standard of legality in analyzing horizontal mergers challenged under section 7. Several courts even seemed to have gone so far as to accept economic "efficiency" arguments, which traditionally have supported successful rule of reason defenses only in cases involving quasi-public utilities or extremely concentrated markets.

This article will examine the changing legal standards used to evaluate the legality of horizontal integration between direct competitors. It will first provide a summary of pre-1974 horizontal merger case law under section 7 of the Clayton Act as originally enacted and as amended by the 1950 Celler-Kefauver Act. next, this article will discuss General Dynamics and the impact of that decision on defenses to merger challenges. It will then analyze the application of the General Dynamics approach by the federal courts, and the concomitant impact of Sherman Act principles upon those courts and the Federal Trade Commission. Finally, this article will conclude that, in implementing a General Dynamics-type approach, many lower courts have failed to accord sufficient deference to Congress' intent underlying the Celler-Kefauver Act.