Appendix B. Horizontal Merger Guidelines of the National Association of Attorneys General

• Pages: 297-324

Appendix B 297

HORIZONTAL MERGER GUIDELINES

OF THE NATIONAL ASSOCIATION OF

ATTORNEYS GENERAL

1. PURPOSE AND SCOPE OF THE GUIDELINES

These guidelines explain the general enforcement policy of the state

and territorial attorneys general (“the Attorneys General”) who comprise

the National Association of Attorneys General1 (“NAAG”) concerning

horizontal acquisitions and mergers2 (collectively “mergers”) subject to

section 7 of the Clayton Act,3 sections 1 and 2 of the Sherman Act4 and

analogous provisions of the antitrust laws of those states which have

enacted them.5

The state attorney general is the primary or exclusive public enforcer

of the antitrust law in most states. The Attorneys General also represent

their states and the natural person citizens of their states in federal

antitrust litigation.6

These guidelines embody the general enforcement policy of the

Attorneys General. Individual attorneys general may vary or supplement

this general policy in recognition of variations in precedents among the

1. The Attorneys General of American Samoa, Guam, The Commonwealth

of Northern Marianas Islands, The Commonwealth of Puerto Rico and

the Virgin Islands are members of NAAG.

2. A horizontal merger involves firms that are actually or potentially in both

the same product and geographic market s, as those markets are defined in

Section 3 of these guidelines.

3. Section 7 of the Clayton Act, 15 U.S.C. § 18, prohibits mergers if their

effect “may be substantially to lessen competition or to tend to create a

monopoly.”

4. Section 1 of the Sherman Act, 15 U.S.C. § 1, prohibits mergers which

constitute an unreasonable “restraint of trade.” Section 2 of the Sherman

Act, 15 U.S.C. § 2, prohibits mergers which create a monopoly or

constitute an attempt, combination or conspiracy to monopolize.

5. The antitrust laws of the states are set forth in 6 TRADE REG. REP.

(CCH) ¶ 30,000 et. seq.

6. The authority of the Attorneys General to invoke section 7 of the Clayton

Act to enjoin a merger injurious to the general welfare and economy of

the State was first articulated in Georgia v. Pennsylvania R.R., 324 U.S.

439 (1945). California v. American Stores, 110 S. Ct. 1853 (1990),

confirms Attorneys General’s authority to enforce Section 7 and confirms

the availability of the divestiture remedy to Attorneys General.

298 State Antitrust Enforcement Handbook

federal circuits and differences in state antitrust laws and in the exercise

of their individual prosecutorial discretion.

These guidelines serve three principal purposes. First, they provide a

uniform framework for the states to evaluate the facts of a particular

horizontal merger and the dy namic conditions of an industry. Second,

they inform businesses of the substantive standards used by the

Attorneys General to review, and when appropriate, challenge specific

mergers. They help businesses to assess the legality of potential

transactions and therefore are useful as a business planning tool. Third,

the guidelines are designed primarily to articulate the analy tical

framework the states apply in determining whether a merger is likely

substantially to lessen competition, not to describe how the states will

conduct litigation. As such, the Guidelines do not purport to provide a

complete restatement of existing merger law. Rather, the Guidelines put

forward a framework for the analysis of horizontal mergers which relies

upon an accurate characterization of relevant markets and which is

grounded in and consistent with the purposes and meaning of section 7 of

the Clayton Act, as amended by the Celler-Kefauver Act of 1950

(“section 7”), and as reflected in its legislative history and interpretation

by the United States Supreme Court.

The organizing principle of the guidelines is the application of facts

concerning the marketplace and widely accepted economic theory to

these authoritative sources of the law’s meaning.

2. POLICIES UNDERLYING THESE GUIDELINES

The federal antitrust law provisions relevant to horizontal mergers,

most specifically section 7 and analogous state law provisions,7 have one

primary and several subsidiary purposes. The central purpose of the law

7. For example, see statutes of Hawaii, Maine, Mississippi, Nebraska, New

Jersey, Ohio, Oklahoma, Texas, Washington and Puerto Rico for

provisions analogous to section 7. See 6 TRADE REG. REP. (CCH) ¶

30,000 et. seq. However, all states with a provision analogous to section

1 of the Sherman Act may also challenge mergers under such authority.

See note 6 concerning state enforcement of section 7. Appendix A

contains copies of the NAAG Voluntary Pre-Merger Disclosure Compact,

the Protocol for Coordinating Federa l-State Merger Probes and the FTC’s

Implementation of Program for Federal-State Cooperation in Merger

Enforcement.