Conglomerate Mergers

The Supreme Court has defined a conglomerate merger as “one in
which there are no economic relationships between the acquiring and the
acquired firm.”1 In other words, the parties are neither actual or potential
competitors nor stand in a vertical (e.g., supplier/customer) relationship.2
Historically, U.S. courts classified transactions as horizontal,
vertical, or conglomerate and developed separate analytical appr oaches
to each.3 Product extension and market extension arguably fell into yet
another category.4
In its 1982 and 1984 Merger Guidelines,5 the Antitrust Division of
the U.S. Department of Justice (DOJ or the Division) disavowed the
1. FTC v. Procter & Gamble Co., 386 U.S. 568, 577 n.2 (1967). The
description is similar to the definiti on used when the Clayton Ac t was
amended. Conglomerate mergers were defined as “those in which there is
no discernible rela tionship in the nat ure of the busines s between the
acquiring and acquired firms.” H.R. REP. NO. 1191, 81st Cong., 1st Sess.
11 (1949).
2. See, e.g., Babcock & Wilcox Co. v. United Techs. Corp., 435 F.Supp.
1249, 1284 (N.D. Ohio 1977); Donald F. Turner, Conglomerate Mergers
and Section 7 of the Clayton Act, 78 HARV. L. REV. 1313, 1315 (1965).
Of course, not all mergers fit neatly into vertical, horizontal, or
conglomerate characterization. The same merger may impact more than
one market, requiring application of horizontal, vertical, and/or
conglomerate analysis to the same transaction.
3. See, e.g., Brown Shoe Co. v. United States, 370 U.S. 294, 317 (1962); see
¶¶ 1100-1164 (3d ed. 2009); LAWRENCE A. SULLIVAN, HANDBOOK OF
THE LAW OF ANTITRUST 653-69 (1977).
4. Procter & Gamble Co., 386 U.S. at 577 (product extension); United
States v. Marine Bancorp., 418 U.S. 602, 624 (1974) (market extension);
United States v. Connecticut Nat’l Bank, 418 U.S. 656, 659 (1974)
[hereinafter 1968 MERGER GUIDE LINES] § III (addressing conglomerate
mergers), available at with
U.S. DEPT OF JUSTIC E, Merger Guidelines (1982) [hereinafter 1982
406 Mergers and Acquisitions
value of characterizing mergers as vertical or conglomerate and did not
identify any theory under which to challenge conglomerate mergers
except the elimination of potential competition (discussed in Chapter X).
There are no other federal merger enforcement guidelines issued by the
DOJ or the Federal Trade Commission (FTC or the Commission)
regarding conglomerate mergers, and neither agency has challenged a
merger under a conglomerate theory since the 1970s. Indeed, one court
has suggested that theories of anticompetitive effects from conglomerate
mergers are not persuasive.6
Nevertheless, several competition-related concerns have been raised
at times about conglomerate mergers and, in 2001, the European
Commission (EC) invoked conglomerate theory (also referred to as
“portfolio effects”) to challenge the merger of General Electric and
Honeywell.7 The concerns of the European Commission included the
entrenchment of dominant firms and the potential risk of anticompetitive
tying or bundling arrangements.8
A. Evaluative Criteria for Judging Conglomerate Mergers
The legislative history of the 1950 amendments to Section 7 of the
Clayton Act (Section 7)9 makes clear that Section 7 was intended to
apply to all merge rshorizontal, vertical, and conglomerate.10 As the
MERGER GUIDELINES] (characterizing nonhorizontal mergers as either
vertical or conglomerate “adds no thing to the analys is”), available at m and U.S. DEPT OF
JUSTICE , MERGER GUIDELINES (1984) [hereinafter 1984 MERGER
GUIDELINES] § 4.1 n.25 (same), available at
6. See T. N. Dickinson Co. v. LL Corp., 1985 WL 14175, at *4 (D. Conn.
1985) (“[n]o allegations suggest that [successor company] was either a
competitor, a supplier or customer, or potential competitor” on face of
complaint so that, according to complaint, acquisition had no effect on
structure of competition).
7. Commission Decision, Case COMP/M.2220General Electric/
Honeywell, 2004 O.J. (L 48) 1, 1[1] 342-48.
8. Id. ¶¶ 412, 442.
9. 15 U.S.C. §18.
10. H.R. REP. No. 1191, 81st Cong., 1st Sess. 11 (1949); see Brown Shoe Co.
v. United States, 370 U.S. 294, 317 (1962); FTC v. Procter & Gamble
Co., 386 U.S. 568, 577 (1967).

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