Appendix B. National Association of Attorneys General Horizontal Merger Guidelines Executive Summary

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APPENDIX B

NATIONAL ASSOCIATION OF ATTORNEYS

GENERAL HORIZONTAL MERGER GUIDELINES

EXECUTIVE SUMMARY

The Horizontal Merger Guidelines of the National Association of

Attorneys General (NAAG) was adopted by the Attorneys General at the

Association’s spring meeting, March 30, 1993, in Washington, D.C. The

Guidelines explain the general enforcement policy of the 55 state and

territorial Attorneys General and the Corporation Counsel of the District

of Columbia, who comprise NAAG’s membership, concerning

horizontal mergers and acquisitions. Individual Attorneys General may

vary or supplement this general antitrust enforcement methodology in the

exercise of their individual prosecutorial discretion or to account for

differences in state antitrust laws and variations in precedents among the

federal circuits. In most states, the Attorney General is the primary or

exclusive public enforcer of state antitrust law. The Attorneys General

also represent their states and consumers who live in their states in

federal antitrust litigation.

Horizontal mergers are acquisitions between firms operating in the

same product and geographic market, that is, direct competitors seeking

to sell the same product to the same group of buyers. Horizontal mergers

can allow firms to attain market power or monopoly power, raise prices

to consumers above competitive levels and lessen competition. In

economic terms, market power is the ability of a firm to raise or maintain

prices to consumers above a competitive level, to restrict output of the

product or to limit entry into the market. Some horizontal mergers may

have no substantial effect on competition or may improve firms’ ability

to compete by enhancing their efficiency. These Guidelines provide the

framework for state antitrust enforcers to evaluate proposed mergers and

determine their likely effect on competition.

The Guidelines serve three primary purposes. First, they are a

uniform framework for analyzing horizontal mergers that relies on

market realities rather than speculation and is based on the purposes and

meaning of Section 7 of the Clayton Act, the federal antimerger law.

Second, they inform the business community of the substantive standards

used by the Attorneys General to review and, when appropriate,

challenge proposed horizontal mergers. Finally, they articulate the