the Workshop on Horizontal Merger Guidelines, Federal Trade Commission/Department of Justice
It is a great pleasure to welcome so many prominent practitioners, academics, and enforcement officials to discuss the Horizontal Merger Guidelines and the impact they have on antitrust enforcement, not only at the federal level, but also in the states and internationally. Today, over 60 countries have merger control regimes and the influence of the Guidelines can be seen almost everywhere.(1)
What do we hope to achieve over the next three days? The Guidelines are not a cookbook, providing specific details on every aspect of a merger investigation. They do detail a methodology to analyze whether a merger is likely anticompetitive. This workshop will explore state-of-the-art application of the Guidelines by those with the most experience at using them.
We at the FTC have emphasized transparency over the last 32 months. For example, we have released statements in several cases in which we did not sue.(2) To increase transparency and to facilitate discussion at this workshop, we have released two data sets. In December, the FTC and DOJ jointly released merger enforcement data going back to FY 1999.(3) The data contains market share and concentration levels associated with the agencies' decisions to challenge mergers in a wide range of product markets. Earlier this month, the FTC released data on 151 horizontal merger investigations from FY 1996 through FY 2003.(4)
Unlike the December release, this second release included data when no enforcement action was taken as well as data on additional key facts. One statistic we released involves the number of significant competitors. Many practitioners think and talk in these terms rather than concentration. These data also look at enforcement decisions depending on whether "hot documents" exist or strong and credible customer complaints are received.
These data should become core information in the healthy debate about the level and direction of merger enforcement policy. I note that our recent data release largely reflects cases in which I did not participate. Indeed, I participated in cases involving only about 10 percent of the markets analyzed. As I have said elsewhere, current merger practice reflects a bipartisan approach,(5) and the release of this and similar data in the future should help us understand merger enforcement in practice.
The data we released highlights several important issues in merger analysis. One involves the longstanding debate about the significance of concentration or HHI numbers. I hope the data we released and the breadth of analysis we will hear this week will finally put to rest the notion that HHI levels have any specific significance, except at very high levels. Instead, the agencies try to answer the ultimate question - will the merger impair competition? We consider several variables that have an impact on the likely level of competition in the post-merger markets.
Fealty to the original guideline numerical levels was abandoned as the agencies gained experience. In 1992, the guidelines were amended to codify the existing practice of giving great weight to qualitative factors. The 1982 and 1984 guidelines had given more emphasis to quantitative thresholds, particularly involving HHI levels above 1800.(6) The 1992 guidelines reduced the significance of the 1800 threshold by inviting fuller consideration of other conditions that helped predict whether price increases were likely post merger.(7)
Thus, the preeminence that some would continue to give to concentration or HHI numbers is misplaced. State-of-the-art merger analysis has moved well beyond a simplistic causality of high concentration leading to anticompetitive effects. The number of competitors is certainly important - 4 to 3 gets our attention quicker than 6 to 5 - but current merger practice does not elevate a single fact or number to dispositive significance. The totality of the evidence must point to an increased likelihood of anticompetitive effects before we will act.
Much of this experience with merger investigations is captured in the Guidelines themselves. One of the salutary effects that the Guidelines have is the transparency they help bring to merger enforcement. They help to clarify enforcement policy and doctrine so that practitioners and their clients can make better judgments.(8) Government officials should explain the basis on which they exercise their authority. Stakeholders can then expect clear and consistent enforcement actions.
Of course, application of the Guidelines is not always obvious. We constantly strive to bring more transparency to our merger process, and we hope this workshop will result in a better understanding of current merger policy.
Equally important with providing increased transparency for consumers and the business community is the feedback this workshop should provide for the agencies. We want to obtain important information that will assist us in doing our jobs. We thus expect to learn from you over the next three days. We will hear from the most experienced practitioners who work with the Guidelines every day, as well as academics doing state-of-the-art research. We want to know how you think the Guidelines are working, what you perceive to be their strengths and weaknesses, what are the issues in which there is agreement and disagreement, and what areas you consider important for future study, research, and clarification. Application of the Guidelines must respond to new legal and economic analysis. With your help, we will continue that process at this workshop.
1. See William J. Kolasky & Andrew R. Dick, The Merger Guidelines and the Integration of Efficiencies into the Antitrust Review of Horizontal Mergers, 71 Antitrust Law Journal 207, 236-40 (discussing how the treatment of efficiencies in the 1982 Merger Guidelines and subsequent revisions has influenced thinking in other jurisdictions).
2. See, e.g., Statement of the Federal Trade Commission, AmeriSource Health Corporation/Bergen Brunswig Corporation (Aug. 24, 2001), available at www.ftc.gov/os/2001/08/amerisourcestatement.pdf; Concurring Statement of Commissioner Mozelle W. Thompson, AmeriSource Health Corporation/Bergen Brunswig Corporation (Aug. 24, 2001), available atwww.ftc.gov/os/2001/08/amerisourcethompsonstatement.pdf; Statement of the Federal Trade Commission Concerning Royal Caribbean Cruises, Ltd./P&O Princess Cruises plc and Carnival Corporation//P&O Princess Cruises plc (Oct. 4, 2002), available atwww.ftc.gov/os/2002/10/cruisestatement.htm; Dissenting Statement of Commissioners Sheila F. Anthony and Mozelle W. Thompson, Royal Caribbean/Princess and Carnival/Princess (Oct. 4, 2002), available at www.ftc.gov/os/2002/10/cruisedissent.htm; DOJ and FTC Merger Challenges Data, Fiscal Years 1999-2003 (Dec. 18, 2003), available at www.ftc.gov/opa/2003/12/mergereffects.htm; Statement of the Commission, Sunoco Inc./Coastal Eagle Point Oil Co. (Dec. 29, 2003), available atwww.ftc.gov/os/caselist/0310139/031229stmt0310139.pdf; Statement of Chairman Timothy J. Muris, Genzyme Corporation/Novazyme Pharmaceuticals, Inc. (Jan. 13, 2004), available at www.ftc.gov/os/2004/01/murisgenzymestmt.pdf; Dissenting Statement of Commissioner Mozelle W. Thompson, Genzyme Corporation/Novazyme Pharmaceuticals, Inc. (Jan. 13, 2004), available atwww.ftc.gov/os/2004/01/thompsongenzymestmt.pdf; Statement of Commissioner Pamela Jones Harbour, Genzyme Corporation/Novazyme Pharmaceuticals, Inc. (Jan. 13, 2004), available at www.ftc.gov/os/2004/01/harbourgenzymestmt.pdf;; Statement of Federal Trade Commission, Caremark Rx, Inc. / AdvancePCS (Feb. 11, 2001), available atwww.ftc.gov/os/caselist/0310239/040211ftcstatement0310239.pdf.
5. Timothy J. Muris, Chairman, Federal Trade Commission, Antitrust Enforcement at the Federal Trade Commission: In a Word - Continuity, Remarks Before the American Bar Association Antitrust Section Annual Meeting, Chicago, Illinois (Aug. 7, 2001), available at/speeches/muris/murisaba.htm.
6. The 1982 guidelines denominated markets with a post-merger HHI of 1800 or more as "highly concentrated." The significance of the HHI thresholds employed in the 1982 guidelines thresholds is examined in ABA Antitrust Section, Monograph No. 12, Horizontal Mergers: Law and Policy 196-97 (1986).
7. Compare the language of the 1982 and 1984 Merger Guidelines to the language of the 1992 Horizontal Merger Guidelines. In 1982, the guidelines stated that, for mergers that would result in a post merger HHI above the 1800, the Department of Justice was "likely to challenge mergers ... that produce an increase in the HHI of 100 points or more." United States Dep't of Justice, Merger Guidelines (June 14, 1982) reprinted in 4 Trade Reg. Rep (CCH) ¶ 13,102 at § 3.A.1. In 1984, the Department of Justice made it clear that, even at the 1800/100 level, other factors, such as ease of entry, the financial condition of firms, and changing market conditions, would be considered in determining whether an enforcement action was warranted. However, only in "extraordinary cases w[ould] such factors establish that the merger is not likely to substantially competition." United States Dep't of Justice, Merger Guidelines (June 14, 1984), reprinted in 4 Trade Reg. Rep (CCH) ¶ 13,103 at § 3.11.
The 1992 Horizontal Merger Guidelines went much further to limit the importance of concentration statistics, indicating only that there was a "presumption" that mergers at the 1800/100 level "are likely to create or enhance market power or facilitate its exercise." "[T]he presumption [could] be overcome" by a showing that other factors, such as entry, make it unlikely that the merger will have an anticompetitive effect." United States Dep't of Justice and Federal Trade Commission, Horizontal Merger Guidelines (Apr. 2, 1992), reprinted in 4 Trade Reg. Rep (CCH) ¶ 13,104 at § 1.51.
8. See William Blumenthal, Clear Agency Guidelines: Lesson from 1982, 68 Antitrust L.J. 5 (2000) (analyzing the impact of the 1982 Merger Guidelines as deriving significantly from the efforts of the drafters to state and clarify the government's analytical methodology).