The Proposed Merger Guidelines: a Return to Structuralism

• Publication year: 2024
• Citation: Vol. 2 No. 1

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David H. Evans ^*

The author of this article has some thoughts on the merger guidelines proposed recently by the Federal Trade Commission and the Department of Justice.

The Federal Trade Commission and the Department of Justice (together, the Agencies) have come out with proposed Merger Guidelines (the Guidelines) ¹ that abandon the enforcement policy of the Obama administration, and several before it, and reflect the "mandate of Congress that tendencies toward concentration in industry are to be curbed in their incipiency." If a merger "would significantly increase concentration and result in a highly concentrated market," the Agencies will "presume that a merger may substantially lessen competition based on market structure alone. This is a return to structuralism and will put the Agencies at odds not only with decades of practice but with half a century of court decisions.

Departures

The Guidelines state, for example, that a merger that results in a party holding more than 30 percent market share with a Herfindahl-Hirschman Index delta of 100 or more is presumptively anticompetitive. Among the transactions that would be presumptively illegal under the proposed guides are these. There are seven companies in a relevant market, six with 15 percent market share and the seventh with 10 percent. Two of the 15 percent participants merge. They have a combined share of 30 percent and a delta of 450. They can expect a challenge. So could any firm with a 28 percent share if acquiring another with 2 percent, even if three strong competitors had more than 20 percent each and new entrants were nibbling at the market. These guidelines say the Agencies will try to stop mergers of equals in any markets of five or six similarly sized

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firms. Few courts would find these problematic. Indeed, no court has enjoined such a deal in decades.

There are other departures. Guideline 4 states that "[m]ergers should not eliminate a potential entrant in a concentrated market." The Agencies do put some guardrails around that guideline like requiring evidence the potential entrant was in fact a potential entrant. Guideline 5 states that "[m]ergers should not substantially lessen competition by creating a firm that controls products or services that its rivals may use to compete." That statement is a bit broad and suggests that any vertical merger where rivals purchase goods or services from the upstream entity would be a substantial lessening of competition. The...