Horizontal Merger Antitrust Enforcement: Some Historical Perspectives, Some Current Observations

Abstract

The DOJ-FTC Merger Guidelines were developed for and best deal with horizontal mergers where the theory of harm is "coordinated effects". The Guidelines deal awkwardly, at best, with mergers where the theory of harm is "unilateral effects". The broad body of evidence -from profitability studies, from pricing studies, and from auction studies -indicates that seller concentration matters. But these studies do not provide adequate guidance as to whether current antitrust enforcement is too strict or too lenient with respect to mergers. Research on the consequences of the "close call" mergers that were not challenged might well provide such guidance, as might a "meta analysis" of the extant price-concentration studies. New procedures are needed for inquiry and enforcement where the theory of harm is "unilateral effects", as is a market definition paradigm for monopolization cases. JEL Classification Numbers: K21, L41

Applying “Merger Guidelines” market definition to (de)regulatory policy: Pros and cons

“…The main revision in the 1992 version, issued for the first time jointly by the DOJ and FTC, was to classify competitive effects into two categories, coordinated, referring to explicit collusion, and unilateral, based on the specific reduced incentive of the merged firms to cut price. 16 Since then, unilateral effects analysis has come to be dominated by models of Bertrand competition among differentiated competitors (White, 2006). 17 With advances in the availability of data and econometric tools for measuring product-specific demands based on own and competitors' prices, some have suggested that merger effects can be evaluated and simulated directly without the need for explicit market definition.…”

“…18 Rubinfeld, Daniel, ''Testimony before the Antitrust Modernization Commission,' ' (Jan. 19, 2006), available at http://www.amc.gov/commission_ hearings/pdf/rubinfeld_statement_final.pdf. Lawrence White, the chief economist at the Antitrust Division when the 1982 HMGs were issued, has suggested that the HMGs were written exclusively if implicitly with only coordinated effects in mind, and that they do not fit apply well to differentiated product models underlying most unilateral effects arguments (White, 2006). 19 Regulation can raise concerns when a merger involves a combination of a regulated firm with a firm operating in a vertically related regulated market (Brennan, 2004).…”

Bundled Rebates as Exclusion Rather Than Predation

“…al., 2006). On the methodological side, economists are reassessing the extent to which market definition (DOJ/FTC Horizontal Merger Guidelines, 1997) should define merger assessment or is a tool to be used with discretion, particularly in the analysis of unilateral effects (White, 2006). However, absent critiques grounded in libertarian philosophical commitments or exceptional confidence regarding the ability of entry to cure all ills (Dewey, 1979;Armentano, 1986;Crandall and Winston, 2003), the general theoretical premise the collusion is unwarranted or horizontal mergers can reduce competition remain relatively secure.…”