Thirty-One Merger Policy Questions Still Lingering after the 1992 Guidelines

• Author: William Blumenthal
• DOI: 10.1177/0003603X9303800305
• Published date: 01 September 1993
• Date: 01 September 1993
• Subject Matter: Article

The Antitrust Bulletin/Fall 1993 593

Thirty-one merger poIiey questions

still lingering after the

1992 Guidelines

BY WILLIAM BLUMENTHAL*

The 1992 Merger Guidelines provide avaluable, thoughtful

description

of

the analytical framework applied by the U.S.

Department of Justice and the Federal Trade Commission in eval-

uating transactions. Necessarily, though, the Guidelines reflect

many difficult policy choices, all of which are open to debate.

This article discusses 31 policy

questions-a

meaty, but not com-

prehensive set

I-that

are addressed by the Guidelines. For each of

*Partner, Sutherland, Asbill &Brennan, Washington, DC.

AUTHOR'S NOTE: Earlier versions

of

this article were presented at a Con-

temporary Policy Issues Session at the 66th Annual Conference

of

the

Western Economic Association International in July 1992 and at an

Antitrust Section program at the Annual Meeting

of

the American Bar

Association in August 1992. I am grateful for comments on earlier drafts

from David A. Balto, Paul T. Denis, Susan S. DeSanti, Alan A. Fisher,

Robert H. Lande. and David T. Scheffman. The final version

of

this article

was essentially completed in September 1992.

A more comprehensive treatment undoubtedly would treat many

issues that are omitted here. Some are

obvious-for

example, I do not

address the question, At what levels should the safe-harbor Herfindahl-

e1993 by Federal Legal Publications, Inc.

594

The antitrust bulletin

the questions, I provide some background, summarize the position

expressed in the Guidelines, and offer commentary (intended prin-

cipally for practitioners) on the relationship between the Guide-

lines and other authority.

Many of the policy questions are derived from the administra-

tive discretion engineered into the text of the Guidelines them-

selves.! Compared with

their

predecessors, the 1992 Merger

Guidelines move in the direction of increased Ilexibility! (and

hence increased ambiguity4), largely reflecting the legitimate

Hirschman Index (HHI) thresholds be set? Other issues fall within topics

treated more generally, such as coordinated interaction, unilateral effects,

and entry; the issues within these topics could be unpacked and analyzed

in enough detail to justify entire articles of their own.

2In fashioning policy statements such as the 1992 Merger Guide-

lines, the federal enforcement agencies face a tension between flexibility

and simplicity.

For

adiscussion

of

the resolution of this tension in the

1992 Guidelines and the resulting implications for practitioners, see Blu-

menthal, Ambiguity and Discretion in the New Guidelines: Some Implica-

tions for Practitioners, 61

AN'TrrRUST

L.J. 469 (1993). In general, flexible

guidelines tend to be complex, discretionary, and ambiguous. Simple

guidelines tend to be rigid and less than faithful to the policy objectives

that they are intended to serve (other than simplicity itself). See ABA

AN'TrrRUST

SECTION,

MONOGRAPH

No. 12,

HORIZONTAL

MERGERS:

LAW

AND

POLICY

50-52

(1986) [hereinafter ABA

MERGER

MONOGRAPH].

3See C. James, Deputy Assistant Att'y Gen., Remarks before the

Manufacturer's

Alliance on Productivity and Innovation 1(Apr. 10,

1992) [hereinafter James Speech] ("The 1992 Guidelines

...

continue

the movement away from the wooden application of structural criteria

and toward a more realistic assessment of the likely effects of particular

business combinations"); cf. K. Arquit, Director, FTC Bureau of Compe-

tition, Perspectives on the 1992 U.S. Government Horizontal Merger

Guidelines, before the ABA 40th Annual Antitrust Spring Meeting

2-3

(Apr. 2, 1992) ("the new Guidelines

...

also provide for flexibility by

pointing out at several junctures that precise calculations are not always

possible

and

that

the agencies will sometimes have to make overall

assessments

of

some market factors based on the available evidence").

4See Dissenting Statement

of

Commissioner Mary L. Azcuenaga,

On the Issuance of the Horizontal Merger Guidelines 2 (Apr. 2, 1992)

[hereinafter Azcuenaga Dissent] ("The new Guidelines are opaque on a

number of points and ambiguous on issues of critical importance").

31 questions:

595

beliefs that the world may be too complex to accommodate simple

merger

rules>

and that the state of economic theory may not be

sufficiently advanced to yield clear results.s Certain provisions

may reflect disagreement, too, between the Department and the

Commission over the appropriate standard." The flexibility and

ambiguity mean that standards are not fully

specified-and

hence

that policy questions remain open.

Other provisions of the Guidelines appear to be inconsistent

with the general thrust of the case law.s Even

if

these provisions

were entirely unambiguous, the discrepancies between the Guide-

lines and the case law reflect differing policy views and raise

5See. e.g., infra questions

19,22,25.

6See. e.g., infra question 21.

7See. e.g., infra questions

1,11,

17,20,27.

Three related points are

noteworthy. First, the ambiguous language enables each agency to inter-

pret the Guidelines in accordance with its preference. The conflicting

interpretations greatly complicate the rendering of private advice, since

the counselor cannot be certain of which interpretation will govern the

transaction. The conflicting interpretations also will enable advocates to

cite each agency's policy statements against the other in litigation. See

generally Blumenthal, supra note 2.

Second, the principal draftsmen of the 1992 revisions have left the

enforcement agencies. Whether the draftsmen's interpretations will be

adopted by their successors remains uncertain.

Third, the state attorneys general disagree on various provisions with

the Department and the Commission. At the time of this article's prepara-

tion, the National Association of Attorneys General had released draft

revisions to its 1987 Horizontal Merger Guidelines for public comment.

In providing citations to pertinent authority throughout the article, I

elected not to rely upon the draft revisions (which had not been adopted)

or the 1987 Guidelines (which were no longer being followed). The final

NAAG revisions were adopted in March 1993, see National Association

of

Attorneys General 1993 Horizontal Merger Guidelines, Trade Reg.

Rep. (CCH) No. 256 Supp. (Mar. 30, I993}--in time for this last-minute

citation, but too late for meaningful treatment as warranted. For many of

the policy issues that are addressed below, the 1993 NAAG Guidelines

offer prescriptions at variance from those of the 1992 federal Guide-

lines-thus

contributing to the practitioner's confusion, but also illustrat-

ing that the policy questions remain unsettled.

8See. e.g., infra questions 22, 25, 29.