WELFARE STANDARDS, SUBSTANTIVE TESTS, AND EFFICIENCY CONSIDERATIONS IN MERGER POLICY: DEFINING THE EFFICIENCY DEFENSE

For several years already, the efficiency defense (and its incorporationin the law) has been a much debated issue in merger policy.When discussing the introduction of an efficiency defense inmerger control, it is important to define clearly its contentand interpretation. However, different approaches to the conceptof efficiency defense exist in the literature, and it is notalways clear which jurisdictions apply an efficiency defense.Therefore, to improve communication and comparison between jurisdictions,it would be useful to reach agreement on the exact content ofan efficiency defense. This paper proposes to define the efficiencydefense along two dimensions: a conceptual one—relatedto the welfare standard—and a procedural one—relatedto the application of the substantive test. The main conclusionof this paper is that the concept of efficiency defense canonly be appropriately applied under a total welfare standardand if efficiencies can be directly balanced against the anticompetitiveeffects of mergers on a case-by-case basis. Using this definition,only in Canada and Australia (formal review process) would anefficiency defense exist.