ABSTRACT Planetary systems with sufficiently small orbital spacings can experience planetary mergers and ejections. The branching ratio of mergers versus ejections depends sensitively on the treatment of planetary close encounters. Previous works have adopted a simple ‘sticky-sphere’ prescription, whose validity is questionable. We apply both smoothed particle hydrodynamics and N-body integrations to investigate the fluid effects in close encounters between gas giants and the long-term evolution of closely packed planetary systems. Focusing on parabolic encounters between Jupiter-like planets with MJ and 2MJ, we find that quick mergers occur when the impact parameter rp (the pericentre separation between the planets) is less than 2RJ, and the merger conserved at least 97 per cent of the initial mass. Strong tidal effects can affect the ‘binary-planet’ orbit when rp is between 2RJ and 4RJ. We quantify these effects using a set of fitting formulae that can be implemented in N-body codes. We run a suite of N-body simulations with and without the formulae for systems of two giant planets initially in unstable, nearly circular and coplanar orbits. The fluid (tidal) effects significantly increase the branching ratio of planetary mergers relative to ejections by doubling the effective collision radius. While the fluid effects do not change the distributions of semimajor axis and eccentricity of each type of remnant planets (mergers versus surviving planets in ejections), the overall orbital properties of planet scattering remnants are strongly affected due to the branching ratio change. We also find that the merger products have broad distributions of spin magnitudes and obliquities.