Abstract

When merger control laws first emerged in the United States and West Germany in the early 1900s, some businessmen and economists argued that the efficiency of businesses was impeded by antimerger laws. They contended that only very large businesses could realize significant efficiencies, be internationally competitive, and attain technological progress. This paper analyzes the role that these efficiency arguments had on the laws in West Germany and the United States, respectively. German law mainly upheld the idea that preservation of competition was most important for business efficiency, but also included a provision that firms could put forward the social desirability of efficiency as a defense to anticompetitive mergers. American law, on the other hand, lacked such a possibility. It favored protecting the freedom and opportunity of firms without economic power over promoting efficiency of firms with economic power. As economic conditions began to worsen in the early 1970s, German policy continued to preserve the competitive market while making exceptions for the sake of efficiency. In contrast, American policy began to place more emphasis on autonomy of firms and nonintervention, and less emphasis on controlling concentration in the marketplace. This paper examines the treatment of efficiency as a beneficial factor in merger analysis.