The 1992 Horizontal Merger Guidelines: A brief critique

The 1992 Horizontal Merger Guidelines of the United States Department of Justice and the Federal Trade Commission represent an improvement over previous horizontal merger guidelines in certain respects especially in the treatment of entry. However, the 1992 Guidelines continue to suffer from problems with market definition methodology. Also, the softening of HHI presumptions and burdens and the incorporation of an increased competitive effects section seem to reduce the effectiveness of the Guidelines.The views expressed in this article are solely those of the authors and not of any state or federal agency.     

The Horizontal Merger Guidelines of 1992

The 1992 Horizontal Merger Guidelines of the Department of Justice and the Federal Trade Commission outline an enforcement policy which makes a long overdue break with its predecessors in awarding no decisive or predominant role to market concentration as a criterion of anticompetitive effect. However, the new policy does not provide an adequate substitute criterion: the tests that it prescribes for screening merger proposals are so specified that a potentially large proportion of anticompetitive mergers can escape challenge without showing any promise of improving efficiency. The time is ripe for a comprehensive inquiry aimed at formulating a more satisfactory policy.     

Coordinated Effects in the 2010 Horizontal Merger Guidelines

Recent research has highlighted the quantitative contribution to merger analysis from extending unilateral effects models to understand the payoffs to future potential coordinated effects. Some of the emphasis of this research appears to have made its way into the 2010 Horizontal Merger Guidelines. In this paper, we demonstrate the quantification of coordinated effects in an oligopoly and procurement model, and we show that screens that are based on upward pricing pressure are not adequate in mergers where coordinated effects are a potential concern.     

Brown Shoe Versus the Horizontal Merger Guidelines

The new Horizontal Merger Guidelines, if treated by courts as a source of law, would reduce the discretion that is traditionally exercised by courts in defining relevant markets and market power in merger cases. This is an undesirable shift in the balance of power because courts have used the market power inquiry stage of merger analysis as a general checkpoint or weigh station for evaluating factors relevant to the welfare effects of a merger.     

Entry Deterrence,Concentration, and Merger Policy

Review of Industrial Organization - In merger enforcement, entry is considered to be a factor that potentially can mitigate otherwise anti-competitive effects of a merger. The current framework for...     

The Efficiencies Defense in the 2010 Horizontal Merger Guidelines

We analyze the efficiencies defense that is contained in the 2010 Merger Guidelines, which provides the most current statement of the Agencies?? enforcement philosophy and procedure. Most of our attention centers on efficiencies in production, but we also address merger-specific efficiencies that may lead to improved product quality, enhanced services, or even to the introduction of entirely new products. We begin with the analytically clean case of merger-specific efficiencies that are accompanied by monopoly power. From the perspective of either consumer welfare or social welfare, this presents the welfare analysis that should guide merger policy. We, then, examine the errors that may arise due to the restricted role that efficiencies play in Section 7 enforcement. Finally, we close with some policy recommendations.     

Judicial Response to the 2010 Horizontal Merger Guidelines

Review of Industrial Organization - We study how the courts have responded to the 2010 Horizontal Merger Guidelines issued by the U.S. Department of Justice and the Federal Trade Commission....     

The 2010 Horizontal Merger Guidelines After 10 Years

Review of Industrial Organization - This paper introduces the Special Issue of the Review of Industrial Organization that studies the impact of the 2010 Horizontal Merger Guidelines after 10 years...     

Effects of the 2010 Horizontal Merger Guidelines on Merger Review: Based on Ten Years of Practical Experience

Review of Industrial Organization - We assess how the 2010 Merger Guidelines have been applied by agencies and courts. We conclude that:     

Estimating Differential Dynamic Merger Effects on Market Structure and Entry in Related Markets

The U.S. and EU merger guidelines emphasize “ease of entry” arguments but little is known about the dynamic impact of realized mergers on market structure. This study provides insights on this topic with the use of detailed firm-level data on the memory chip market. Our estimation results provide evidence for differential merger effects on market structure. These effects depend on whether the mergers are dominated by market-power or efficiency gains. While efficiency-dominated mergers cause exit, market-power-dominated mergers attract entrants, and these effects are increasing over time. We also find that market-power mergers have a larger effect on entry than efficiency mergers have on exit. Our results show that mergers can reduce the number of potential entrants into related product markets and serve as an instrument to “reduce the likelihood of entry”.

     

基于兼并成本和协同效应的横向并购研究

进入新世纪后,中国企业的并购活动越来越频繁。本文基于SSR模型,引入兼并成本和协同效应,研究并购厂商的并购动机以及并购行为对社会福利的影响,分析协同效应与兼并成本之间的关系。得出结论:当协同效应使厂商增加的利润大于兼并成本时,并购厂商总是愿意并购;并购后,福利在消费者和非并购厂商之间转移。当协同效应和兼并成本满足一定条件时,横向并购才可以增加社会福利。     

Harm to Competition Under the 2010 Horizontal Merger Guidelines

In August, 2010, the Antitrust Division and the Federal Trade Commission issued new Guidelines for assessing horizontal mergers under the antitrust laws. These Guidelines were long awaited not merely because of the lengthy interval between them and previous Guidelines but also because enforcement policy had drifted far from the standards articulated in the previous Guidelines. The 2010 Guidelines are distinctive manly for two things. One is briefer and less detailed treatment of market delineation. The other is an expanded set of theories of harm that justify preventing mergers or reversing mergers that have already occurred. The 2010 Guidelines reflect a growing belief that in markets where product differentiation is minimal competition tends to be robust and the structural presumptions stated in previous Guidelines were too harsh. By contrast, where product differentiation is substantial the Guidelines?? approach tended to define markets too broadly, overlooking significantly anticompetitive possibilities. Under the 2010 Guidelines unilateral effects analysis relevant markets can be very small, often limited to three or four firms, and excluding some obvious substitutes. Markets in merger analysis are not defined for their own sake, however, but rather to ascertain whether a particular alteration in market structure covered by the merger provisions will be likely to facilitate a price increase. The 2010 Guidelines address four substantive merger concerns: exclusion, restraints on innovation, unilateral effects, and coordinated effects. The Guidelines have a separate section on mergers limiting ??innovation and product variety,?? treated mainly in the category of unilateral effects. The 2010 Guidelines are more flexible than previous Guidelines and also more catholic about the types of harms that mergers might cause and the techniques that can be used to assess them. Older Guidelines were excessively wed to methodologies that were at the forefront of applied merger analysis when they were drafted, but that tended to make the Guidelines obsolete as new methodologies became available. Not only do methodologies change, they are also specific to the situation. Further, they tend to be well developed in the literature and accessible to experts consulted by those defending a merger as well as to the government economists who employ them. To be sure, there is a tradeoff between flexibility and guidance. Often we can have more of one only by giving up some of the other, and that tradeoff is clearly present in the 2010 Guidelines.     

Cournot Oligopoly Conditions under which Any Horizontal Merger Is Profitable

Findings in economic theory suggest that horizontalmergers involving firms with aggregate market shareless than 50% are unlikely to be motivated by theconsequent reduction in competitivity. The resultsarise because, absent cost efficiencies, quantity-settingfirms in small mergers are impoverished by the merger.We demonstrate that this conclusion is a consequence ofthe strong restrictions imposed on the demand function,and we identify a well-behaved demand function suchthat any set of merging firms benefits from the reductionin competition even when there are no cost efficiencies.     

Natural Oligopoly Responses,Repeated Games,and Coordinated Effects in Merger Analysis: A Perspective and Research Agenda

Review of Industrial Organization - When the 1968 Merger Guidelines were drafted, both the economics and antitrust literatures addressed how competition could be softened when oligopolists...     

Department of justice and federal trade commission: Horizontal Merger Guidelines

Department of justice and federal trade commission: Horizontal Merger Guidelines     

Static or Dynamic Efficiency: Horizontal Merger Effects in the Wireless Telecommunications Industry

Review of Industrial Organization - This paper studies five mergers in the European wireless telecommunication industry and analyzes their impact on prices and capital expenditures of both merging...     

Empirical Analysis of Merger Enforcement Under the 1992 Merger Guidelines

This paper presents an analysis of merger enforcement at the Federal Trade Commission under the 1992 Merger Guidelines. The econometric analysis suggests that enforcement decisions are best predicted with the Herfindahl index when the relevant theory is collusion and the number of significant rivals when the relevant theory is unilateral effects. Evidence such as “hot” documents, customer complaints, and historical events suggestive of past competitive problems also increase the chance of a challenge. Mirror image considerations suggestive of continued post-merger competition (“cold” documents, customer support, and procompetitive events) reduce the probability of challenge in one specification. This article is based on non-public data obtained from Federal Trade Commission internal files. The Commission’s General Counsel has authorized publication of such data in aggregated form under Commission Rule 4.11(g), 16 C.F.R. 4.11(g). I would like to thank David Scheffman, Paul Pautler, Elizabeth Callison, and Jeffrey Fischer for helpful comments on the project and Anthony Alcorn, Brian Cross, Fulvio Cajina, Paul Golaszewski, Wendy Hanson, Janet Ireland, Karl Kindler, Michael Madigan, Madeleine McChesney, Joseph Remy, and especially Matthew Tschetter for research assistance in assembling the data. Of course, the analyses and conclusions set forth in this paper remain those of the author and do not necessarily represent the views of the Federal Trade Commission, any individual Commissioner, or any Commission Bureau.     

Geographic Market Definition in the Merger Guidelines: A Retrospective Analysis

Since the initial Merger Guidelines in 1968, the Department of Justice and Federal Trade Commission have revised their merger enforcement screen over the course of six versions. This article examines the evolution of the geographic market component of the Guidelines and the economic implications of changing standards of market delineation on merger enforcement. Using an illustration from the beer industry, we chronicle the development of geographic market definition and its varying effects on merger enforcement over the past 50 years.     

全球石油石化业兼并联合热潮透视

１９９８年世界各大石油公司与石油化工企业强强联合,组成超大型跨国公司。分析这些兼并联合的特点,可以看出,全球一体化进程正在加快,只有具备相当的竞争力,才能在未来的市场上立足。     

An Empirical Analysis of Mexican Merger Policy

A newly created dataset including 239 decisions made by the Mexican Federal Competition Commission on horizontal mergers is used to estimate the different factors affecting the Commission’s resolution decisions. The decision-making process has been approximated by two different discrete choice models. Our results indicate that, contrary to the Commission’s objective, the presence of efficiency gains increases the probability of a case being challenged. We also find that factors different from the ones explicitly mentioned by the Commission have a significant effect upon the Commission’s final decision. In particular, the presence of a foreign company among the would-be merger firms significantly increases the likelihood of observing an allowed merger.