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In Philadelphia National Bank (PNB), the Supreme Court held that it is improper to weigh a merger's procompetitive effects in one market against the merger's anticompetitive effects in another. The merger in question, which ostensibly reduced retail competition in the Philadelphia area, could not be justified on the grounds that it increased competition against New York banks and hence perhaps enhanced competition in business banking in the mid-Atlantic region. I will refer to the Supreme Court's prohibition on balancing effects across markets as a "market-specificity" rule. Under this rule, efficiencies that may counterbalance anticompetitive aspects must be specific to the market in which the anticompetitive aspects are present. Although the market-specificity rule is periodically invoked and followed, its justification is hazy. The Court in PNB provided one justification - concern about a slippery slope to monopoly - that has limited applicability. Other commentators, particularly the Areeda-Hovenkamp treatise, have provided more elaborate but equivocal defenses of the rule. For their part, the antitrust agencies embrace the rule as a baseline, but then leave open the possibility of waiving it in the exercise of their prosecutorial discretion. In this essay, I revisit the justifications for the market-specificity rule. While there is some sense to the idea that merger effects should be analyzed on a market-by-market basis - particularly given the complexity and administrative difficulty of comparing effects across markets - the principle is not, and cannot, sensibly be applied as a strict rule. Rather, the principle is best operationalized as a presumption against balancing effects across market lines that can be rebutted based on compelling evidence in particular cases.


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