Appendix M. 1993 Horizontal Merger Guidelines of the National Association of Attorneys General

• Pages: 755-785

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APPENDIX M

1993 HORIZONTAL MERGER GUIDELINES

OF THE NATIONAL ASSOCIATION OF

ATTORNEYS GENERAL

1. Purpose and Scope of the Guidelines

2. Policies Underlying These Guidelines

2.1 The Economic Effects of Mergers

2.11 Acquisition of Market Power and Wealth Transfers

2.12 Productive Efficiency

2.13 Allocative Efficiency

2.14 Raising Rivals’ Costs

3. Market Definition

3.1 Product Market Definition

3.11 Consumers Who May Be Vulnerable to Price

Discrimination

3.2 Geographic Market Definition

3.21 Geographic Markets Subject to Price Discrimination

3.3 Principles for Recognizing Potential Competition

3.31 Expansion of Output

3.32 New Sources of Additional Supply

3.4 Calculating Market Shares

3.41 Foreign Firms

3.411 Alternative Method for Defining Markets Utilizing

the Methodology of the United States Department of

Justice/Federal Trade Commission Merger

Guidelines

4. Measurement of Concentration

4.1 General Standards

4.2 Post-Merger HHI between 1000 and 1800

4.3 Post-Merger HHI Above 1800

4.4 Mergers Involving the Leading Firm or a New Innovative Firm

in a Market

5. Additional Factors Which May be Considered in Determining

Whether to Challenge a Merger

5.1 East of Entry

5.11 Overview

756 MERGERS AND ACQUISITIONS

5.12 Timeliness of Entry

5.13 Likelihood of Entry

5.14 Sufficiency of Entry

5.15 Entry Alternatives

5.151 Diversion of Existing Supplies into the Market

5.151(1)Exports

5.151(2)Internal Consumption

5.151(3)Increased Importation

5.152 New Production Sources of Additional Supply

5.152(1)Production Flexibility

5.152(2)Construction of New Facilities

5.152(3)Arbitrage

5.2 Collusion and Oligopolistic Behavior

5.3 Efficiencies

5.4 Powerful or Sophisticated Buyers

6. Failing Firm Defense

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

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 markets, 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.