Vertical Mergers that Induce Exit

AuthorDavid J. Balan
Published date01 September 2022
Date01 September 2022
The Antitrust Bulletin
2022, Vol. 67(3) 442 –450
© The Author(s) 2022
Article reuse guidelines:
DOI: 10.1177/0003603X221103198
Vertical Mergers that Induce Exit
David J. Balan*
It is well understood that vertical mergers can create an incentive for the merged firm to foreclose
unintegrated rivals, and that one way this foreclosure can manifest itself is by driving an unintegrated
rival below its minimum viable scale and causing it to exit. The central claims of this article are (1) that
exit-inducing mergers are likely to be especially harmful because they result in the elimination of a
competitor and (2) that even a modest amount of foreclosure can induce exit if the rival was not too
far above its minimum viable scale before the merger. I argue that exit-inducing mergers merit explicit
treatment in a revised version of the DOJ/FTC Vertical Merger Guidelines, both because they are
harmful and because the possibility that they may occur with only modest foreclosure has important
implications for how they should be investigated.
vertical mergers, foreclosure, exit, minimum viable scale, Vertical Merger Guidelines, VMG
I. Introduction
Whether and to what extent vertical mergers are harmful has been a subject of controversy for decades,
among both researchers and policy makers. Recently, the policy controversy has been especially sharp.
On June 30, 2020, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) issued
new Vertical Merger Guidelines (VMG).1 This was the first new formal agency guidance about vertical
merger enforcement since the DOJ’s 1984 Non-Horizontal Merger Guidelines. On September 15,
2021, the FTC withdrew from the new VMG and leveled criticism against them for being too lax.2
*Econ One Research, Inc., Washington, DC, USA
Corresponding Author:
David J. Balan, Econ One Research, Inc., Washington, DC 20005, USA.
1103198ABXXXX10.1177/0003603X221103198The Antitrust BulletinBalan
1. U.S. Dep’t of Justice & Fed. Trade Comm’n, Vertical Merger Guidelines (2020),
2. Press Release, Fed. Trade Comm’n, Federal Trade Commission Withdraws Vertical Merger Guidelines and Commentary
(Sept. 15, 2021),

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