scholarly journals The New Vertical Merger Guidelines: Muddying the Waters

2021 ◽  
Author(s):  
Michael A. Salinger
Keyword(s):  
Federal Trade Commission ◽  
Department Of Justice ◽  
Potential Harm ◽  
Merger Guidelines ◽  
Vertical Merger ◽  
Potential Competition ◽  
Dominant Firms ◽  
Static Pricing ◽  
Vertical Mergers

AbstractThe new U.S. Department of Justice and Federal Trade Commission Vertical Merger Guidelines focus on how vertical mergers are likely to affect static pricing incentives. While vertical mergers can create incentives to increase prices, they can also provide incentives to decrease prices. Which of the possible outcomes is likely to occur depends on details that are generally difficult to measure. Potential competition between dominant firms, the theory of potential harm to competition that the 1984 Department of Justice Merger Guidelines stressed, remains a more compelling rationale for blocking vertical mergers than the likely effect on static pricing incentives.

scholarly journals Vertical Mergers and Input Foreclosure Lessons from the AT&T/Time Warner Case

2021 ◽  
Author(s):  
Carl Shapiro
Keyword(s):  
Economic Analysis ◽  
Federal Trade Commission ◽  
Department Of Justice ◽  
Merger Guidelines ◽  
Vertical Merger ◽  
Practical Guide ◽  
Economic Expert ◽  
Time Warner ◽  
Vertical Mergers ◽  
The U.S

AbstractThis article offers a practical guide to analyzing vertical mergers using the general approach to input foreclosure and raising rivals’ costs that is described in the 2020 Vertical Merger Guidelines that were issued by the U.S. Department of Justice and the Federal Trade Commission. The step-by-step analysis described here draws lessons from how that theory of harm played out in the lone vertical merger case that has been litigated by the antitrust agencies in recent decades: the 2018 challenge by the Department of Justice to the merger between AT&T and Time Warner. I testified in court as the DOJ’s economic expert in that case. I explain here how to quantify the increase in rivals’ costs and the elimination of double marginalization that are caused by a vertical merger and how to evaluate their net effect on downstream customers. I also explain how this economic analysis fits into the three-step burden-shifting approach that the courts apply to mergers under Section 7 of the Clayton Act. Based on my experience in the AT&T/Time Warner case, I identify a number of shortcomings of the 2020 Vertical Merger Guidelines.

scholarly journals Judicial Response to the 2010 Horizontal Merger Guidelines

2021 ◽  
Vol 58 (1) ◽  
pp. 51-79
Author(s):  
Carl Shapiro ◽  
Howard Shelanski
Keyword(s):  
Federal Trade Commission ◽  
Case Law ◽  
Market Concentration ◽  
Horizontal Merger ◽  
Average Increase ◽  
Department Of Justice ◽  
Merger Guidelines ◽  
Direct Competition ◽  
The Government ◽  
The U.S

AbstractWe 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. Looking at decided cases, we find that both the government and merging parties rely on the 2010 Guidelines in presenting their cases, each side respectively arguing that it should win if the court properly follows them . The 2010 Guidelines had the strongest effect on the case law in the area of unilateral effects, where a number of courts have embraced them in ways that clearly depart from earlier decisions. The case law now exhibits much greater receptivity to a government showing that the merger will lead to higher prices simply due to the loss of direct competition between the two merging firms. The courts also have followed the 2010 Guidelines by more willingly defining markets around targeted customers. We do not detect any effect on decided cases of the higher concentration thresholds found in the 2010 Guidelines. Both the average pre-merger level of market concentration and the average increase in market concentration alleged by the government in litigated cases to date declined after 2010 .

scholarly journals The 2010 Horizontal Merger Guidelines After 10 Years

2021 ◽  
Author(s):  
Joseph Farrell ◽  
Carl Shapiro
Keyword(s):  
Federal Trade Commission ◽  
Analytical Techniques ◽  
Economic Research ◽  
Horizontal Merger ◽  
Horizontal Mergers ◽  
Special Issue ◽  
Department Of Justice ◽  
Substantial Impact ◽  
Merger Guidelines ◽  
The Impact

AbstractThis paper introduces the Special Issue of the Review of Industrial Organization that studies the impact of the 2010 Horizontal Merger Guidelines after 10 years On August 19, 2010, the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) issued newly updated Horizontal Merger Guidelines (2010 Guidelines) [See https://www.ftc.gov/sites/default/files/attachments/merger-review/100819hmg.pdf.]. The 2010 Guidelines begin by stating: “These Guidelines outline the principal analytical techniques, practices, and the enforcement policy of the Department of Justice and the Federal Trade Commission (the “Agencies”) with respect to mergers and acquisitions involving actual or potential competitors (“horizontal mergers”) under the federal antitrust laws.” Since the first Merger Guidelines were issued by the DOJ 1968, the merger guidelines have been an important channel by which economic research and learning affects antitrust enforcement. Each iteration of the merger guidelines has reflected the economic thinking of the day. Each iteration also has made a substantial impact on merger enforcement and the development of antitrust law. This special issue examines the impact of the 2010 Merger Guidelines after 10 years.

A Quantitative Methodology for Determining Relevant Geographic Markets in Higher Transportation Cost Industries

2018 ◽  
Vol 63 (4) ◽  
pp. 431-443
Author(s):  
Martino De Stefano ◽  
Joanna Tsai
Keyword(s):  
Federal Trade Commission ◽  
Transportation Cost ◽  
The Other ◽  
Horizontal Merger ◽  
Quantitative Methodology ◽  
Department Of Justice ◽  
Merger Guidelines ◽  
Loss Analysis ◽  
Actual Loss ◽  
The U.S

The U.S. Department of Justice/Federal Trade Commission Horizontal Merger Guidelines describes the hypothetical monopolist test (HMT) and significant and nontransitory increase in price (SSNIP) as tools to define antitrust markets. However, the discussion leaves some ambiguities with regards to the implementation of such tools. In this article, we present a methodology for quantitatively delineating geographic markets that is consistent with the Guidelines. In particular, for geographic markets that are based on the locations of customers, the market boundaries encompass the region into which sales are made from the merging parties’ plants, and competitors in the market are firms that sell to customers in the specified region. We use two approaches to identify the competitive reach of a plant—one based on actual shipping distances, which reflect the areas where the plant actually sells; and the other based on distances at which the plant’s product can be shipped profitably, which reflect all areas where the plant can potentially compete for customers. These distances are used to “draw circles” around plants to identify areas where one merging party plant’s competitive reach overlaps with the reach of another plant belonging to the merging partner, thus identifying the overlap customers. For each identified overlap customer area, the HMT is implemented using the critical loss analysis following a SSNIP by the hypothetical monopolist. We explain how to calculate the critical loss as well as the likely actual loss from the SSNIP.

scholarly journals Vertical Mergers, The Coase Theorem, And The Burden of Proof

2020 ◽  
Vol 16 (4) ◽  
pp. 488-510
Author(s):  
Timothy J Brennan
Keyword(s):  
Vertical Integration ◽  
Burden Of Proof ◽  
Federal Communications Commission ◽  
Coase Theorem ◽  
Horizontal Mergers ◽  
Department Of Justice ◽  
Vertical Merger ◽  
First Order ◽  
Time Warner ◽  
Vertical Mergers

Abstract The challenge by the Department of Justice (DOJ) to AT&T’s acquisition of Time Warner, and a prior challenge by DOJ and Federal Communications Commission to Comcast’s acquisition of NBC-Universal, has increased attention on vertical mergers. The standard approach identifies a tactic that the merged firm would employ that is both profitable and harms consumers. This approach misses the target; a profitable but anticompetitive tactic may be necessary but is not sufficient. The “Coase theorem” implies that courts and enforcement agencies should instead focus on why vertical integration is necessary to achieve an outcome that would be profitable to the merging firms. The focus on the tactic rather than why ownership matters presumes that vertical merger is necessary, without supporting theory or evidence. The same proposition should hold for horizontal mergers, but the required strength of evidence is greater for vertical mergers because mergers between complement providers are first-order beneficial and the conduct facilitated by horizontal mergers but not vertical mergers is typically illegal.

scholarly journals Night Landings on an Aircraft Carrier: Hospital Mergers and Antitrust Law

1997 ◽  
Vol 23 (2-3) ◽  
pp. 191-220
Author(s):  
Thomas L. Greaney
Keyword(s):  
Federal Trade Commission ◽  
Federal Courts ◽  
Antitrust Law ◽  
Department Of Justice ◽  
Aircraft Carrier ◽  
Hospital Mergers ◽  
The Past ◽  
Consent Decrees ◽  
The Government ◽  
Administrative Proceedings

Justice Stewart’s 1966 dictum about the inevitability of government success in challenging mergers under Section 7 of the Clayton Act held true for another fifteen years or so. In the early 1980s, however, federal enforcement agencies, the Department of Justice (DOJ) and the Federal Trade Commission (FTC), began to find the federal courts less hospitable to antitrust merger cases as more sophisticated economic inquiries and changing proof burdens complicated the task of identifying anticompetitive mergers. Indeed, since the early 1980s, the government has lost more litigated merger cases than it has won and has come under criticism from some quarters for becoming gun shy and not adequately policing the wave of consolidations that have occurred over the past decade.Hospital mergers, however, are a different story. Until two years ago, the government rode a streak of important victories in federal courts and FTC administrative proceedings, and had obtained consent decrees from scores of hospitals that had announced plans to merge.

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