SOCIETÀ ITALIANA DI DIRITTO ED ECONOMIA
Edward Iacobucci (Faculty of Law, University of Toronto)
Abstract
Competition law has almost always sought to address the risk of anticompetitive mergers through ex ante injunctive remedies, either prohibiting or restructuring proposed mergers. This article contends that there are advantages to a shift, at least in some circumstances, to monetary payments rather than injunctions. The article identifies four contexts in which a merger tax would be a potentially appropriate response to a propose, or consummated, merger. First, a tax on anticompetitive global mergers, that is, mergers that have a multinational impact, and for which local injunctive remedies are unsuitable, helps resolve the potentially conflicting determinations of different domestic antitrust authorities. A tax may be levied by jurisdictions that find the merger to be anticompetitive, while other mergers would not levy such a tax. In special cases, the tax produces a globally optimal result, but more generally, it mitigates the harm, including the risk of error and the race-to-the-strictest, from local review of global mergers.
Second, a merger tax might be an appropriate response to acquisitions of nascent competitors by firms with market power. Such mergers may have a low but non-zero probability of proving anticompetitive. While processes relying on injunctive remedies would tend to approve such mergers despite the risks, a merger tax generates some deterrence of potentially anticompetitive mergers without the stark result implied by an injunction prohibiting it. It also allows the proceeds of the tax to be directed to mitigate the impact of the merger.
Third, a merger tax imposed after the fact should a merger prove to be anticompetitive has several advantages. It allows the authorities to make a decision when there is more information about the competitive impact of the merger, while nevertheless generating ex ante deterrence by parties anticipating the tax. It also avoids the intractable problems associated with attempt to undo a consummated merger. For these reasons, the ex post merger tax would be another useful enforcement approach to acquisitions of nascent competitors.
Fourth, the merger tax would allow competition law to account for multiple social goals while avoiding indeterminacy and incoherence. The tax would allow enforcement agencies to focus on the economic effects of the merger, and proceeds from the tax could be relied upon to advance other goals.
To be sure, there are drawbacks to the tax, including the risk of error costs, the risk of strategic behaviour by rent-extracting countries, and the costs of calculating the tax in any given case. But these drawbacks presently also apply to the current injunction-based merger regimes, as well as other aspects of competition law enforcement. The mergers tax provides a promising avenue to address enforcement challenges that presently exist in most antitrust enforcement regimes today.