---
type: "AIHallucinationFinding"
title: "What conditions must a merging party satisfy to invoke the failing firm defence under the 2025 OECD…"
citation_id: "RLB-H-INT-OECD-OECD-MERGER-REVIEW-RECOMMENDATION-2025-Q005-Opus47"
finding_uid: "INT-OECD-INT-001-OECD-MERGER-REVIEW-RECOMMENDATION-2025-v1-005--opus-47-websearch"
question_uid: "INT-OECD-INT-001-OECD-MERGER-REVIEW-RECOMMENDATION-2025-v1-005"
regulation_id: "INT-OECD-INT-001-OECD-MERGER-REVIEW-RECOMMENDATION-2025"
regulation_slug: "OECD-MERGER-REVIEW-RECOMMENDATION-2025"
regulation_title: "Recommendation of the Council on Merger Review (2025 Revision)"
regulator_short_code: "OECD"
regulatory_body_id: "OECD-INT-001"
jurisdiction_code: "INT"
j_level: "J1"
ai_subject: "claude-opus-4-7"
ai_subject_display: "Claude Opus 4.7 (web search on)"
ai_subject_version: "opus-47-websearch"
response_failure_mode: "inference_drift"
substrate_document_name: "R1-REGULATION-00001"
substrate_document_path: "https://reglegbrief.com/substrate/INT/OECD/OECD-MERGER-REVIEW-RECOMMENDATION-2025/R1-REGULATION-00001/source.pdf"
substrate_section_anchor: "Section III.11.b — Failing firm defence: three-condition test vs. established two-condition doctrine"
citation_issue_types: ["Contradictory", "Pretextual"]
audiences: ["ai_labs"]
published_at: "2026-06-07T23:15:59.054280+00:00"
substrate_version: 1
methodology_version: "2.3"
license: "CC-BY-4.0"
resource: "https://reglegbrief.com/regulators/j1/int/oecd/OECD-MERGER-REVIEW-RECOMMENDATION-2025/ai-labs/finding/INT-OECD-INT-001-OECD-MERGER-REVIEW-RECOMMENDATION-2025-v1-005--opus-47-websearch/"
tags: ["ai-hallucination", "inference_drift", "oecd", "oecd-merger-review-recommendation-2025", "int"]
timestamp: "2026-06-16T00:00:00+00:00"
---

# AI Hallucination Finding: What conditions must a merging party satisfy to invoke the failing firm defence under the 2025 OECD…

- **Citation ID.** `RLB-H-INT-OECD-OECD-MERGER-REVIEW-RECOMMENDATION-2025-Q005-Opus47`
- **Finding UID.** `INT-OECD-INT-001-OECD-MERGER-REVIEW-RECOMMENDATION-2025-v1-005--opus-47-websearch`
- **Regulation.** [`OECD-MERGER-REVIEW-RECOMMENDATION-2025`](/okf/regulations/OECD-MERGER-REVIEW-RECOMMENDATION-2025.md) — Recommendation of the Council on Merger Review (2025 Revision)
- **Regulator.** [`OECD-INT-001`](/okf/bodies/OECD-INT-001.md) — Organisation for Economic Co-operation and Development
- **AI subject.** Claude Opus 4.7 (web search on)
- **Failure mode.** [`inference_drift`](/okf/taxonomy/failure-modes.md)
- **Published.** 2026-06-07T23:15:59.054280+00:00

## Question put to the AI subject

What conditions must a merging party satisfy to invoke the failing firm defence under the 2025 OECD Merger Review Recommendation, and how demanding is the overall standard compared to established doctrine?

## AI subject's verbatim answer

THREE cumulative conditions ... (3) ABSENT-THE-MERGER COUNTERFACTUAL: ASSETS WOULD EXIT — without the merger, the target's productive assets would inevitably leave the market (i.e. the competitive constraint disappears regardless of the merger).

## Verbatim regulator text contradicting the answer

> require, inter alia, evidence that the business was likely to have exited and the existence of less anti-competitive alternative buyers or other options for reorganisation are not viable, and that the exit of the firm's assets would cause more harm to competition than the merger.

_Source:_ [R1-REGULATION-00001](https://reglegbrief.com/substrate/INT/OECD/OECD-MERGER-REVIEW-RECOMMENDATION-2025/R1-REGULATION-00001/source.pdf)
_Section anchor:_ Section III.11.b — Failing firm defence: three-condition test vs. established two-condition doctrine

## Failure mode

**`inference_drift`** — Inference drift — the AI inferred a conclusion the regulator's text does not warrant, often by combining unrelated provisions.

## Citation-issue types

- **Contradictory** — <https://legalinstruments.oecd.org/public/doc/195/195.en.pdf>
- **Contradictory** — <https://www.oecd.org/content/dam/oecd/en/publications/reports/1996/02/failing-firm-defence_cea11e63/1712635f-en.pdf>
- **Pretextual** — <https://one.oecd.org/document/DAF/COMP(2009)38/en/pdf>
- **Pretextual** — <https://www.oecd.org/en/publications/failing-firm-defence_1712635f-en.html>

## Related concepts

- Regulation: [OECD-MERGER-REVIEW-RECOMMENDATION-2025](/okf/regulations/OECD-MERGER-REVIEW-RECOMMENDATION-2025.md)
- Regulator: [OECD-INT-001](/okf/bodies/OECD-INT-001.md)
- Failure-mode taxonomy: [inference_drift](/okf/taxonomy/failure-modes.md)
- Methodology: [v2.3](/okf/methodology.md)
- Editorial standards: [right of reply](/okf/editorial-standards.md)

## Reproduction

Citation ID: `RLB-H-INT-OECD-OECD-MERGER-REVIEW-RECOMMENDATION-2025-Q005-Opus47`

Resource URL (HTML view of this finding):

<https://reglegbrief.com/regulators/j1/int/oecd/OECD-MERGER-REVIEW-RECOMMENDATION-2025/ai-labs/finding/INT-OECD-INT-001-OECD-MERGER-REVIEW-RECOMMENDATION-2025-v1-005--opus-47-websearch/>

This finding is reproducible against the substrate document linked above, using the same AI subject, the same methodology version, and the verbatim question text.