You are right that those firms who suspect that the market would predict a signficant price decrease that would vindicate their claims before regulators or courts would be eager for such an evaluation. But this is just one of the possible outcomes. And outcomes with any price increase or even price neutrality *might* be used against the firm as evidence of a violation of the Clayton Act. Anyway, isn’t one of the benefits of using market evaluations for internal firm decision-making precisely their use in situations where the firm doesn’t have a strong prior about the impact of the merger on prices?

Yes, markets forecasting price increases would really be considered evidence that post-merger prices would increase. This doesn’t mean necessarily via collusion, but also unilateral price effects. The agencies predict post-merger prices in advance of the merger and challenge those they believe will result in higher prices. They generally do not have the luxury of observing the actual realized prices (though there are some exceptions to this rule).

As to your hypothetical: “If the markets had forecast price decreases and the price increased anyway, would that also be considered additional evidence of collusion, beyond the price increase?”

Again, there are no post-merger realizations to use as evidence when the merger is analyzed or litigated. Still, it is true that if the parties had forecasts of price decreases in advance of the merger, they could use this as evidence that the merger should be approved. So the markets could be used either way by the parties — as can any non-market related forecasts and documents which contain predictions about post-merger prices.

The question should really be whether prediction markets like these would really be more successful in convincing agencies to either challenge or approve the merger depending on their prediction. If one believes the benefits of prediction markets are that great in terms of enhanced accuracy, and I do, than the answer should to that question should be “yes.”

As such, I can see risk averse antitrust counsel advising clients to avoid the use of prediction markets in the same way that antitrust compliance programs attempt to steer firms clear of producing the sort of hot documents that also make steering antitrust events through the regulatory process more difficult.

Note, I think my post makes clear that I do not believe this is a good turn of events. But if the question is “why not use prediction markets,” I do wonder whether this sort of issue is part of the answer.