Summer 2020, Volume 3, Number 1

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.