Merger guidelines in the United States are a set of internal rules promulgated by theAntitrust Division of theDepartment of Justice (DOJ) in conjunction with theFederal Trade Commission (FTC). These rules have been revised over the past four decades. They govern the process by which these two regulatory bodies scrutinize and/or challenge a potentialmerger. Grounds for challenges include increasedmarket concentration and threat tocompetition within arelevant market.
These merger guidelines were criticized in some quarters for excess concern with issues of market structure such asbarriers to entry andconcentration ratios at the expense of efficiency andeconomies of scale.[3] They were, however, a step forward in two ways: they gave more accurate advice to corporate management as to when and how mergers would be examined and brought new economic ideas into antitrust enforcement, specifically the"structure-conduct-performance" model ofindustrial organization.[2]
They remained largely unchanged until 1982 whenAssociate Attorney General Bill Baxter, under the authority ofU.S. Attorney GeneralWilliam French Smith, released a new set of guidelines, which made heavier use of modern concepts ofmicroeconomic theory, including using theHerfindahl index to measuremarket concentration.[4] The newer guidelines took a more favorable view ofeconomies of scale and efficiency of production as rationales for integration.[2] Moreover, they raised the level of market concentration necessary for the government to scrutinize mergers, effectively treating competition as a means to greater efficiency rather than as an independent goal.[5] This approach was controversial: some antitrust lawyers saw it as a loosening of previous restraints on corporate consolidation, and someState Attorneys General responded to Baxter's changes by tightening merger enforcement at the state level.[3]
The guidelines were revised again in 1984.[6] The only portion of the 1984 guidelines that remains in effect isSection Four, which governs the examination of market effects ofvertical integration. These guidelines were replaced by the 1992 Merger Guidelines,[7] which fine-tuned previously established tools and policies, such as theSSNIP test and rules governing the acquisition of failing firms.[8] The 1992 Guidelines were revised in 1997, almost concurrently with the FTC's challenge of theStaples-Office Depot merger in federal court.
The 1997 Horizontal Merger Guidelines were replaced on August 19, 2010.[9] These guidelines introduced the concept of "upward pricing pressure" resulting from a merger between competing firms. The 2010 revisions, while deemed by some to be an improvement,[10] attracted criticism fromlaw and economics scholars who contend that they do not update efficiencies analysis,[11] that they may not be recognized by the courts[12] and that they do not embody principles that reflect dynamic competition.[13]
^Judd E. Stone & Joshua D. Wright,The Sound of One Hand Clapping: The 2010 Merger Guidelines and the Challenge of Judicial Adoption, 39 REV. IND. ORGAN. 145 (2011).
