MERGER LAW ENFORCEMENT IN THE EVOLVING ANTITRUST ENVIRONMENT

Remarks of

Mary L. Azcuenaga

Commissioner

Federal Trade Commission

before the

CS First Boston
1995 East Coast M&A Conference

The Pierre Hotel
New York, New York

May 12, 1995

The views expressed are those of the Commissioner and do not necessarily reflect those of the Federal Trade Commission or any other Commissioner.

Good morning. I am delighted to be here. I have been invited to talk about the "evolving antitrust environment." I want to congratulate the organizers of the conference for this choice of topics. Quite often, the title is "new directions" in antitrust, but although antitrust is evolving, it doesn't go in new directions every time a conference is held. Antitrust policy has evolved in significant ways over the years and continues to do so in response to new ideas and developments in economic theory. I will begin today by providing some historical perspective on merger policy.

This is a time of year around which a number of notable events in antitrust history have occurred. Twenty-nine years ago this month, the Supreme Court handed down its famous decision in the Vons's Grocery case, holding unlawful a merger between two grocery chains that together accounted for 7.5% of sales of retail groceries in Los Angeles. 1 This was the case in which Justice Stewart commented that "[t]he sole consistency" he could find in merger decisions "is that in litigation under 7, the Government always wins." 2 Twenty-seven years ago, the Department of Justice released its first set of guidelines for merger enforcement policy under the Clayton Act. Thirteen years ago next month, the FTC issued its Statement Concerning Horizontal Merger Policy, and the Department of Justice released its 1982 merger guidelines, followed exactly two years later by the 1984 merger guidelines. Three years ago, on April 2, 1992, the FTC and the Department issued their joint horizontal merger guidelines.

Given this history, perhaps you might expect me to take this occasion to announce yet another important development in merger law. If so, I am sorry to disappoint you -- I have no such momentous news. Instead, I will offer a few observations about how merger policy has evolved and how the policy is likely to continue to evolve in the future. I will offer my own views, which do not necessarily reflect those of the Commission or of any other commissioner.

Although the process has been evolutionary, merger policy today as compared to thirty years ago is dramatically different. In the 1960's and 1970's, merger analysis was concerned with industry structure as a predictor of conduct. In the 1968 merger guidelines, market share data were "accord[ed] primary significance," 3 and the Department of Justice viewed the "primary role" of merger enforcement "to preserve and promote market structures conducive to competition," because the "conduct of the individual firms in a market tends to be controlled by the structure of that market." 4 Early economic research formed the empirical underpinning for the classic structure-conduct- performance model.

Some economists began to criticize this approach beginning in the early 1970's. One significant development was the finding that profitability was more closely associated with the market shares of individual firms than with industry concentration, raising the possibility that something other than anticompetitive pricing was responsible for high profits. The possibility of economies of scale, rather than anticompetitive activity, was quickly identified as an alternative explanation for high profits.

Another possibility is that large market shares and high profits are correlated because they both result from superior efficiency. Simply stated, a firm that builds a better mousetrap or that builds it at lower cost will become profitable and obtain a large share of the mousetrap market. Indeed, more recent work by economists shows that increased concentration often accompanies both lower costs and higher profits. This is not to say that the number and size distribution of firms in a market bears no relevance to the likely level of competition. This type of evidence remains an important part of merger analysis, as reflected in our merger guidelines.

In 1982, the Commission, in its Statement Concerning Horizontal Mergers, 5 discussed some of these changes. The Commission explained that the reliance on market share and concentration data as the principal indicators of market power was "founded on early empirical economic literature indicating a significant positive relationship [among] concentration levels, industry performance and profits." Market share data provided a convenient, relatively objective benchmark with which to evaluate mergers. By 1982, the Commission concluded that evidence in addition to market share data should be given greater consideration, citing "more recent empirical economic research" and practical experience in analyzing mergers.

In the 1980's, we witnessed the ascendancy of the so-called Chicago School of thought, with its emphasis on efficiencies, consumer welfare and the rigorous application of economic analysis to assess competitive conditions under the law. The 1982 merger guidelines, for example, recognized that most mergers are competitively neutral or procompetitive, and the focus of merger enforcement was on preventing mergers that create or enhance market power or facilitate its exercise. 6 The analysis of mergers in the 1980's became more fact intensive about competitive conditions in particular markets that bear on the likelihood that a particular transaction will have an anticompetitive effect.

From my perspective, the changes in merger analysis in the 1980's, which were characterized by some as revolutionary, were more evolutionary. Much of the change in antitrust policy generally and in merger policy specifically is attributable to advances in the field of industrial organization economics. Developments in the law have been a lagging rough parallel to developments in economics.

Economic advancements have not stopped, and now we are seeing the ideas of the so-called post-Chicago theorists, who are examining the old orthodoxy and offering new economic theories to analyze business arrangements. In general, the post-Chicago theorists claim that the Chicago thinking relies on abstract economic models and economic theory over facts. 7 A year ago this month, a number of post-Chicago theories were discussed at a seminar entitled "Post-Chicago Economics: New Theories -- New Cases?," jointly sponsored by the FTC, the Department of Justice, Georgetown University Law Center and the Antitrust Section of the American Bar Association. 8 A number of the post-Chicago ideas already are reflected in merger analysis. For example, Jon Baker, recently appointed as Director of the FTC's Bureau of Economics, wrote about the post-Chicago perspective on entry in the 1980's.9 These ideas about entry, specifically the deterrent effects on entry of scale economies and sunk costs, are included in the 1992 merger guidelines.

This year, just one month and one day ago, the new chairman of the Commission was sworn in. Chairman Pitofsky is a well known and highly respected antitrust scholar and practitioner. Under his leadership, the Commission will hold a series of hearings to identify and examine the need for changes in antitrust to deal with global competition and high technology and innovation. This is another example of how merger analysis continues to be forward looking and continues to evolve. New ideas continually are filtering through the screens of precedent and skepticism in the economics literature, in the courts and at the enforcement agencies, and the fittest or most robust, as the economists say, become part of and enrich the antitrust environment.10

Although cases at the margin may require more extensive analysis, merger law enforcement generally is predictable. As a matter of law, it is based on longstanding principles of Section 7 of the Clayton Act that have been applied in cases decided by the courts and the Commission. The mode of analysis that the Commission applies to mergers is described in the 1992 horizontal merger guidelines. For a wide range of transactions, someone who is familiar with these sources and is grounded in the relevant facts will be able to predict with a fairly high degree of confidence whether the government agencies will be interested in examining a particular transaction.

Having said this, there still are some important unknowns. The rule of reason analysis the agencies use does not create a bright line rule to distinguish between lawful and unlawful transactions. Instead, the law bars transactions that are likely to have substantial anticompetitive effects. This requires a judgment that, in turn, requires consideration of the facts surrounding the transaction. The biggest variable in the analysis of mergers is the facts. Merger analysis is highly fact-specific and, because of this, virtually no two cases are identical.

Let me turn now to some statistics that will provide an overview of the Commission's merger enforcement program and perhaps give you some perspective on the process by which we identify the cases that we bring. Then I will highlight a few recent cases that illustrate some cutting edge issues and may indicate possible trends in enforcement.

The first set of statistics has to do with the number of transactions reported to the government. The Hart-Scott-Rodino Act11 requires firms that are contemplating mergers and that meet certain statutory thresholds to provide information to the FTC and the Department of Justice and to observe waiting periods before consummating the transaction. Most but not all of our merger cases begin with HSR filings, and the number of reported transactions provides some indication of the work load.

In fiscal year 1994, which ended September 30, 1994, 2,305 transactions were reported under the Hart-Scott-Rodino Act. The number of transactions reported in 1994 is roughly halfway between 1993, when 1,846 transactions were filed, and 1989, which was the high point in the last fifteen years, when 2,883 transactions were reported. Fortune magazine reported a few months ago that "[d]uring the quarter ended September [1994], the value of announced mergers and acquisitions climbed to a record $111 billion, easily outstripping the old mark set in the fourth quarter of 1988 . . . ." 12 The number of publicly announced mergers, as reported in Fortune, and the number of transactions reported under the Hart-Scott-Rodino Act are different, of course, but both sets of statistics show a substantial increase in the number of transactions. The pace appears to be continuing: In the first half of fiscal year 1995, through the end of March, 1,348 transactions were reported.

All of the transactions that are reported under the Hart- Scott-Rodino Act are examined to see whether enforcement interest is warranted. The great majority of transactions present no competitive issues. Inquiries about many of the transactions that initially appear to present competitive problems are completed within or before the expiration of the initial 30-day waiting period. The litigating staff focus quickly on determinative issues, obtain key documents from the parties, conduct interviews with industry participants and obtain sufficient information to show that further investigation is not warranted. Through this focused investment of resources in the short run, the Commission is able to reduce the number of second requests it issues, thereby saving both public and private resources in the long run. We do not want to drag this process out any more than you do.

There are two schools of thought about how to approach the HSR process. One school of thought is to keep your head down, don't call attention to your deal, and assume or hope that we will miss something. Some transactions that merit investigation may slip through, but we think that we recognize most of the problematic ones. I cannot promise the complete absence of omissions or oversights on the part of the government, but I can tell you that we look at every transaction and, in my opinion, this blend-into-the-woodwork approach is not very promising.

My next set of statistics has to do with the number of mergers investigated. The Merger Guidelines explicitly recognize that most mergers are competitively neutral or procompetitive, and the statistics confirm this. 13 The Commission initiates full investigations of a fraction of the mergers that are reported every year. Of the 2,305 transactions reported under the Hart-Scott-Rodino Act in fiscal 1994, the Commission issued requests for additional information in 46, less than 2% of the total number of transactions reported. A request for additional information, commonly known as a second request, is the first step in a formal merger investigation under the Hart-Scott-Rodino Act and signals concern about possible anticompetitive effects. In the first half of fiscal year 1995, through the end of March, the Commission issued 33 second requests, which is about 2.4% of the 1,348 transactions filed.

What if your transaction is among the 2% or so that elicits a second request? Cooperation can make the process run more smoothly. Let me give you two examples, one of cooperation and one of confrontation. The Lockheed/Martin Marietta transaction was an outstanding example of cooperation. The transaction, valued at more than $9 billion, closed in January of this year, after a negotiated settlement with the Commission. 14 The Commission's complaint alleged that the transaction would have anticompetitive effects in the research, development, manufacture and sale of three products, satellites for use in space-based early warning systems, military aircraft, and expendable launch vehicles.

Lockheed and Martin Marietta approached the agencies before making their initial HSR filings, which enabled us to resolve which of the two agencies would examine the transaction before the clock started ticking. Also before making their initial filing, Lockheed and Martin Marietta provided well-organized sets of information about their businesses and had officials lined up for interviews. The staff were able to examine the materials, talk to the business people, and eliminate a number of areas of potential concern early in the investigation.

This cooperation gave the Commission sufficient information to issue a more narrow, focused second request than otherwise would have been the case. After the second request was issued, Lockheed and Martin Marietta continued to provide documents, make witnesses available and answer questions as areas of concern were identified. The staff were able to keep counsel informed about the course of the investigation, and counsel were able to keep their clients informed. The investigation took about two and a half months from the issuance of the second request until the vote of the Commission to publish the proposed consent order. This is extraordinary, given the number of products involved and the scope of the investigation.

Now let me give you an example of a confrontational filer, but this time I won't name names. I will just call it Firm X. Firm X made no attempt to provide information before the second request was issued or to discuss its scope with the staff. Of course, this is not required, but it can be helpful. The first notable thing that Firm X did was to respond to the second request in one massive delivery. I guess they must have rented a great big truck, and they drove the truck up to 601 Pennsylvania Avenue, and they dumped 500 boxes of documents on our Bureau of Competition. This gives me an opportunity to correct a misperception that I hear voiced every once in a while, that the FTC requires the production of hundreds of boxes in response to a second request. Let me put that myth to rest. It is not in our interest to require that many documents. The more likely scenario is a filer like Firm X that deluges us with cartons of documents for strategic reasons, hoping that we will overlook the "hot" documents sprinkled throughout. We later learned that the attorneys for Firm X derisively referred to the staff of the Commission as a bunch of 24-year-olds. The older attorneys found this somewhat flattering, but some of the younger ones did not.

Firm X apparently hoped that the staff of the Commission, with only 20 days in which to review the 500 boxes and with limited resources, would not find critical documents. This was a tactical error; we open every box. To accomplish this Herculean task, the lead attorney mustered a staff of 20 attorneys, organized them in five teams and assigned them boxes, and they got to work. In four days, beginning on Friday, when the boxes were delivered (probably in the hope and expectation that all those 24-year-olds had big plans for the weekend) and ending on Tuesday, every document in the 500 boxes was reviewed. More than that, we think every hot document was identified, and certainly the staff found enough of them to build a strong case. Private counsel often express surprise at how hard the Commission staff work.

The staff not only found the critical documents, they had time to assess them and to recommend that the Commission seek a preliminary injunction in federal district court to block the proposed transaction.

Before going into court, the staff offered to negotiate a hearing schedule to propose to the judge, but Firm X continued to play hardball. It would not even agree to the time of day. This left matters in the hands of the judge. And here is what he did. The judge ordered the firm to file its answer to the complaint a week later on a Friday, required the FTC to file its rebuttal by 5 P.M. on Sunday, and scheduled the hearing for 9:30 A.M. on Monday. On Monday morning, the parties protested to the judge that the FTC had indeed filed its rebuttal at 5 P.M. on Sunday, and, insult of insults, during a Redskins game. The judge was unrelenting, and the hearing went on as scheduled. Before it was over, the court issued a preliminary injunction, and the parties abandoned their deal.

The Commission took enforcement action in both the Lockheed and the Firm X cases, suggesting that the result in a case does not necessarily vary based on your cooperation or lack thereof. Remember what I said earlier about the importance of the facts to the analysis of mergers. Instead, the lesson I would take from these examples is more narrow. The uncooperative stance was costly and unsuccessful, and it was unpleasant for everybody. The parties used up precious credibility to no apparent good end.

This brings me to a third set of statistics, which shows the number of enforcement actions taken. The Commission takes enforcement action in a very small percentage of reported transactions. We have a strong litigation record that I believe speaks well for our case selection criteria and, of course, the considerable abilities of the Commission's litigating staff. 15 In fiscal 1994, the Commission authorized the staff to seek preliminary injunctive relief in federal district court to block three transactions. 16

The Commission also took action in six merger cases that had been in administrative adjudication. It dismissed the administrative complaint challenging a hospital merger in California, 17 issued its decision and order in two soft drink cases, 18and accepted negotiated settlements in three cases, involving hospitals, 19 blind rivets for aerospace and non- aerospace vehicles, 20 and polyvinyl chloride homopolymer and copolymer and dispersion PVC, a thermoplastic. 21

The Commission also issued twelve final consent orders in fiscal 1994. The cases involved such diverse markets as coating resins used in paint; 22 industrial fuses;23 satellites and expendable launch vehicles ("ELVs") for intermediate weight satellites; 24 computer-controlled carousel storage and retrieval systems for warehouses; 25 polymethyl methacrylate (PMMA), which is sold as acrylic plastic pellets and sheet; 26 hospitals; 27 the pharmaceutical dicyclomine for irritable bowel syndrome; 28 shoe polish; 29 retail pharmacies;30 and onion sets. 31 Two orders accepted for public comment, Tele-Communications, Inc., 32 and First Data Corporation, 33 subsequently were withdrawn when the proposed transactions were abandoned. Both of these cases involved bidding wars: TCI's affiliate was bidding for Paramount; First Data was bidding in bankruptcy court for the consumer wire transfer business of Western Union. In both cases, when a third party prevailed in the bidding war, there was no need for the order.

The Tele-Communications, Inc., case raised interesting issues about the extent to which Commission investigations interfere with the free play of market forces. You may recall the circumstances, which involved a high visibility bidding war for Paramount Studios. The Commission's investigation concerned the proposed acquisition of Paramount by QVC Network, which was controlled by TCI and Liberty Mutual.

Viacom was the other bidder for Paramount; its proposed acquisition of Paramount had already cleared Hart-Scott-Rodino hurdles, so the government was out of the picture for Viacom. As long as the Commission was investigating the proposed QVC deal, but not the proposed Viacom deal, it was perceived that the QVC group would be disadvantaged in the bidding war.

This kind of situation poses a question for an antitrust enforcement agency about interfering with the market for corporate control. The goal of the antitrust laws is to free competition, not to interfere with it. What is an antitrust agency to do? There are few choices.

(July 5, 1994), Commissioner Azcuenaga concurring in part and dissenting in part, and Commissioner Owen dissenting; Columbia Hospital Corp., Docket C-3472 (Nov. 19, 1993).

One possibility would be to drop the investigation altogether on the ground that the merit of leaving the contest for corporation control unfettered outweighs the need to identify and enjoin an anticompetitive acquisition. I question whether prosecutorial discretion should be stretched that far and tend to believe that, for better or worse, Congress has precluded that option. Another possibility is to continue the investigation and ignore the issue, even if it means that a bid that might have been better than the successful bid never sees the light of day. A third possibility is to attempt to move quickly, make a decision and then get out of the way of the bidding. This possibility is appealing, so let us consider how it might work.

First, the Commission might find no competitive problem and simply stand aside. Second, the Commission might decide to try to enjoin the entire transaction, thereby eliminating one bidder but protecting the public from an anticompetitive acquisition. Third, the Commission might identify and impose a narrow remedy that cures a possible competitive problem and permits the target company to continue as a bidder. This is generally what happened in the TCI case. This is an attractive solution, but again I would suggest some cautionary notes.

In TCI, the Commission imposed an order requiring divestiture of TCI's interest in QVC, if QVC acquired Paramount. Since QVC did not acquire Paramount and the proposed order was withdrawn, some might maintain that the order was costless and paved the way for the free play of market forces. The order did clear the way for QVC to participate in the bidding context, but the proposed settlement included an interim agreement that required TCI immediately to sever ties with QVC. To say that the order was costless is to suggest that TCI's ownership interest in QVC was inefficient. Second, the bids for Paramount by QVC would not account for the value of Paramount to TCI. If TCI had been able to continue its relationship with QVC, we might have seen a better offer for Paramount than QVC, sans TCI, was willing or able to make. There is a risk in this situation, given the pressure of the cash tender offer timing, that the Commission will act before it has sufficient evidence of liability. To the extent that an order is not supported by evidence of liability, it is not only inappropriate but also can impose unintended costs. A desire to promote the free play of market forces is commendable, but almost anything the government does can impose costs, and we should not delude ourselves about that.

Now I have one more set of statistics -- this year's enforcement statistics. In fiscal 1995, the Commission has authorized four preliminary injunction actions in federal district court. The challenge to the proposed acquisition of American Tobacco by B.A.T. Industries, involving cigarettes in the United States, was settled by a consent agreement requiring divestiture, 34 and a challenge to two acquisitions by Boston Scientific also was resolved by a consent agreement. 35 The Commission also authorized preliminary injunction suits to block hospital acquisitions in Port Huron, Michigan,36 and in Joplin, Missouri.37

So far in fiscal 1995, the Commission has issued final consent orders in twenty merger cases and placed an additional ten negotiated orders on the public record for comment. These cases involve an array of product markets, including ammunition and propellant for large caliber ammunition 38 and military aircraft, military satellites and satellite launch vehicles; 39 health care, including general acute care hospitals, 40 psychiatric hospitals 41, rehabilitation hospitals, 42 outpatient surgical centers, 43orthopaedic implants, 44 and prescription benefit management programs; 45 pharmaceuticals, including generic verapamil used for chronic cardiac conditions, 46 diphtheria and tetanus vaccines, 47 non-injectable 5HD(1d) agonists for the treatment of migraine headaches,48 and drugs used for drug abuse testing; 49 turbomolecular pumps used in making semiconductors and compact disc metallizers used in making compact discs; 50 polypropylene; 51 aluminum polyester powder for jet engine housings;52 professional illustration computer software; 53 electronic security labels for retail goods; 54funeral homes; 55 retail groceries; 56 retail pharmacies; 57 cable television; 58 and consumer products, including canned cat food,59 canned fruit, 60 and rug shampoo. 61

I have given you a great number of statistics, because I think they are useful in demonstrating the Commission's commitment to merger enforcement and in showing that it has a strong enforcement program. Let me turn now from statistics to some specific cases and some evolving issues of merger analysis. The Clayton Act bars mergers and acquisitions that may "substantially lessen competition" or "tend to create a monopoly" "in any line of commerce in any section of the country." The competitive effects of mergers are assessed in relevant product and geographic markets, a term of art that may or may not have the same meaning as the word "market" in business planning. In defining markets, we ask where consumers can turn for alternatives in the event of a price increase.

In some cases, the product market is defined by the cluster of products and services that firms offer, for example, hospitals (acute care inpatient services), drug stores and supermarkets. Geographic markets in cases involving hospitals, drug stores and supermarkets usually are local, because consumers usually obtain food, health care services and pharmaceuticals and sundries close to home. As competitive conditions change, the market may need to be redefined in response to the facts. Take the case of supermarkets. In some areas, where large warehouse retailers are beginning to compete with supermarkets in the sale of groceries, our analysis would have to take account of that fact in defining the product market. In defining the geographic market, usually we check to see how far consumers will drive to go to a supermarket. But in the Red Apple case here in New York City, the Commission alleged as relevant geographic markets four Manhattan neighborhoods (the Upper East Side, the Upper West Side, Greenwich Village and Chelsea), because consumers in Manhattan don't drive to the grocery store. 62 Columbia Hospital Corporation has become the largest hospital network in the country, but its acquisitions are assessed in local markets, because that is where consumers obtain health care services. A merger of tertiary care hospitals might be analyzed in broader geographic markets, if consumers travel greater distances to obtain more specialized and sophisticated medical services. At the other extreme, mergers involving intellectual property probably have international aspects, because intellectual property is easily transported across national borders.

An interesting recent development in defining markets is the allegation in a number of complaints of a research and development market, separate and distinct from other product markets. In the American Home Products case, for example, which arose from the $9.7 billion acquisition by American Home Products of American Cyanamid Company, the Commission alleged a market in research and development of rotavirus vaccine. 63 Rotavirus is a terrible diarrheal disease that affects children, for which there is no commercially available vaccine. Only three firms, including American Home Products and Cyanamid, allegedly had rotavirus vaccine research projects in or near clinical development. In Glaxo/Wellcome, a $14 billion acquisition, the complaint alleges a reduction in competition in research and development of a class of medicines for the treatment of migraine headaches. 64 A concern is that the acquiring firm will have the ability and the incentive to reduce research and development, and the Commission's orders seek to ensure that the competing R&D projects remain independent competitors.

An R&D market also was alleged in the Sensormatic Electronics case, 65 which involved electronic article surveillance ("EAS") systems that are attached to merchandise to protect against shoplifting. EAS labels trigger an alarm at the store exit, unless neutralized by the clerk at the point of sale. The research and development market in the Sensormatic case involved competition to develop EAS labels that would be embedded automatically in goods or packaging by manufacturers, i.e., at the source of the goods rather than manually by retailers.

Pleading research and development markets is one way in which the enforcement agencies have refined the analysis of Section 7 cases, 66 and we are always open to, indeed, in search of other ways to improve our analysis. Given the pace and the direction of change in some high technology industries, one question that has been raised is whether the analysis the agencies employ is adequate for defining markets in those industries. For example, does merger analysis underestimate the breadth of markets characterized by technological change, resulting in overenforcement of the merger laws and retarding innovation by imposing unwarranted costs? 67

Some scholars have suggested that rapid technological change and market power "are basically incompatible, except in rare instances," because of the alacrity with which new technology can upset the incumbents. 68 They are concerned that merger analysis focuses narrowly on price competition and suggest that the analysis should consider the technological capacity of firms, the disciplinary effects of the R&D programs of competitors, even if new products are not yet for sale, and what they call "the magnitude of the creative destruction" that may result from technological change. 69

In fact, the Commission does consider evidence on these issues. The technological capacity of firms is relevant to identify firms that participate in the market and that may be potential entrants. 70 We look to the "informed judgment"71 of industry participants and experts to assess the industry and the likely sources of change.

Merger analysis always attempts to predict the likely future effects of a proposed transaction, and it would be foolish to claim that our ability to predict is perfect. Although perfection is unachievable, the fact-intensive analysis of mergers takes into account the uncertainties of rapidly changing high technology markets. Weighing the facts is not unique to markets characterized by technological change but must be addressed in every Section 7 case. The flexibility of the antitrust laws that enables us to consider a wide variety of complex situations is a positive aspect of the law and should be seen as an opportunity to make your best case to the government without the constraints of detailed regulations that may not anticipate your needs.

Let me close with a word of caution. Don't evaluate your own deal based on what you read in the papers about other deals. The picture is likely to be incomplete, from the perspective of merger analysis under Section 7. The government is constrained by law from disclosing information developed during a nonpublic investigation, and the parties to a transaction can choose what to disclose. Even if some information is available, other, equally important or even more important information may not be publicly available. In addition, of course, virtually no two transactions are alike on the facts. I advise you not to give in to the temptation to assess your next deal on the basis of what you have read about other deals. The best single explanation of the current evolution of merger analysis is contained in the Merger Guidelines.

Endnotes:

1 United States v. Von's Grocery Co., 384 U.S. 270 (1966).

2 384 U.S. at 301.

3 Department of Justice 1968 Merger Guidelines I.4, reprinted in 4 Trade Reg. Rep. (CCH) 13,101, at 20,523.

4 1968 Merger Guidelines at 2.

5 FTC Statement Concerning Horizontal Mergers (June 14, 1982), reprinted in 4 Trade Reg. Rep. (CCH) 13,200.

6 Department of Justice Merger Guidelines I (June 14, 1982), reprinted in 4 Trade Reg. Rep. (CCH) 13,102.

7 See Editor's Note, "Symposium on Post-Chicago Economics," 63 Antitrust L.J. 445-47 (1995).

8 See "Symposium on Post-Chicago Economics," 63 Antitrust L.J. 445 (1995).

9 See Baker, "Recent Developments in Economics that Challenge Chicago School Views," 58 Antitrust L.J. 645 (1989).

10 See Kovacic, "Antitrust in Perspective: History, Politics & Economics," in ABA Antitrust Section Antitrust Fundamentals 11-14 (April 5, 1995).

11 15 U.S.C. 18a.

12 Pare, "The New Merger Boom, Fortune, Nov. 28, 1994, at 95; see also "Making a meal of mergers," The Economist, Sept. 10, 1994, at 87; Zuckerman, "Shades of the Go-Go 80's: Takeovers in a Comeback," N.Y. Times, Nov. 3, 1994, 1, at 1; "Merger Mania: 1994 Nears Record," USA Today, Dec. 27, 1994, at B4.

13 1992 Horizontal Merger Guidelines 0.1.

14 Lockheed Corporation, Docket C-3576 (May 9, 1995).

15 Since the beginning of fiscal 1989, the Commission has voted to seek a preliminary injunction to block 32 transactions. In the nine cases that went to trial, the Commission obtained a preliminary injunction in six cases and lost one case, and two are pending. In the remaining 23 cases, the parties either entered into a negotiated settlement or withdrew from the transaction before a court decision on the complaint.

16 HealthTrust, Inc., Docket C-3538 (Oct. 20, 1994), Commissioner Yao dissenting; Parkview Episcopal Medical Center, File 931-0125 (Jan. 31, 1994); FTC v. Lee Memorial Hospital, 1994-1 Trade Cas. (CCH) 70,593 (M.D. Fla.), aff'd, 1994-1 Trade Cas. (CCH) 70,803 (11th Cir.), petition for rehearing en banc filed, Civ. No. CV-137-CIV-FTM-25D (11th Cir. Dec. 15, 1994). Commissioners Azcuenaga and Owen dissented from the decision to take enforcement action (April 26, 1994).

17 Adventist Health System, Docket 9234 (April 15, 1994).

18 The Coca-Cola Co., Docket 9207 (June 30, 1994), Commissioners Azcuenaga & Starek recused, appeal filed, Nos. 94- 1595 & 94-1596 (D.C. Cir. Aug. 26, 1994); Coca Cola Bottling Company of the Southwest, Docket 9215 (Aug. 31, 1994), Commissioners Azcuenaga & Starek recused, appeal filed, No. 94- 41224 (5th Cir. Nov. 2, 1994).

19 Columbia Healthcare Corporation, Docket 9256 (May 5, 1994), Commissioner Azcuenaga concurring.

20 Textron Inc., Docket 9226 (May 6, 1994), Commissioner Azcuenaga dissenting from partial dismissal of the complaint.

21 Occidental Petroleum Corp., Docket 9205, reprinted in 5 Trade Reg. Rep. (CCH) 23,370 (Dec. 22, 1992) (Commissioner Owen dissenting in part & concurring in part, Commissioners Starek & Yao not participating), stipulated settlement and final order, No. 93-4122 (2d Cir. Jan. 12, 1994), modified final order (FTC Feb. 3, 1994), Commissioner Owen dissenting.

22 Valspar Corp., Docket C-3478 (Jan. 21, 1994), Commissioner Owen dissenting.

23 Cooper Industries, Inc., Docket C-3469 (Oct. 26, 1993), Commissioner Azcuenaga dissenting on the ground that relief was inadequate.

24 Martin Marietta Corp., Docket C-3500 (Sept. 23, 1994), Commissioner Owen dissenting.

25 Alvey Holdings, Inc., Docket C-3488 (March 30, 1994).

26 Imperial Chemical Industries, PLC, Docket C-3473 (Nov. 29, 1993), Commissioner Owen dissenting.

27 Dominican Santa Cruz Hospital, Docket C-3521 (Aug. 18, 1994), Chairman Steiger concurring, and Commissioners Azcuenaga & Yao dissenting; Columbia Healthcare Corp. (HCA), Docket C-3505

28 Dow Chemical Corp., Docket C-3533 (Sept. 23, 1994), Commissioner Azcuenaga dissenting.

29 Kiwi Brands, Inc., Docket C-3523 (Aug. 24, 1994).

30 TCH Corporation, Docket C-3519 (Aug. 16, 1994), Commissioner Owen concurring in part and dissenting in part.

31 McCormick & Co., Inc., Docket C-3468 (Oct. 25, 1993).

32 File 941-0008 (withdrawn March 16, 1994), Commissioners Azcuenaga & Owen dissenting. I dissented on the ground of insufficient information to support the complaint.

33 File 931-0090 (withdrawn Nov. 7, 1994).

34 B.A.T. Industries, p.l.c., Docket 9271 (April 19, 1995), Commissioner Varney not participating.

35 Boston Scientific Corp., Docket C-3573 (May 3, 1995), Commissioner Azcuenaga concurring in part and dissenting in part; Chairman Pitofsky recused.

36 Port Huron Hospital, File 941-0076 (Nov. 11, 1994), Commissioner Azcuenaga dissenting.

37 Freeman Hospital, File 941-0115 (Feb. 21, 1995). The case now is in litigation. FTC v. Freeman Hospital, No. 95-1448 (8th Cir. March 3, 1995) (rescission ordered).

38 Alliant Techsystems, Inc., Docket C-3567 (April 7, 1995), Commissioner Azcuenaga concurring.

39 Lockheed Corp., Docket C-3576 (May 9, 1995).

40 Columbia/HCA Healthcare Corp., File 951-0022 (announced for public comment April 21, 1995).

41 Charter Medical Corp., Docket C-3558 (Feb. 14, 1995).

42 HealthSouth Rehabilitation Corp., Docket C-3570 (April 12, 1995).

43 Columbia Healthcare Corp., Docket C-3544 (Dec. 6, 1994).

44 Wright Medical Technology, Inc., Docket C-3564 (March 23, 1995).

45 Eli Lilly & Co., File 941-0102 (announced for public comment Nov. 3, 1994), Chairman Steiger & Commissioner Varney concurring, Commissioner Azcuenaga dissenting (on the ground that the order did not remedy the competitive problems alleged in the complaint) & Commissioner Starek recused.

46 IVAX Corp., Docket C-3565 (March 27, 1995).

47 American Home Products Corp., Docket C-3557 (Feb. 14, 1995), Commissioner Azcuenaga concurring and questioning adequacy of relief.

48 Glaxo plc, File 951-0054 (announced for public comment March 15, 1995).

49 Roche Holding Ltd., Docket C-3542 (Nov. 22, 1994).

50 Oerlikon-Buhrle Holding AG, Docket C-3555 (Feb. 1, 1995).

51 Royal Dutch Petroleum Co., File 941-0043 (announced for public comment Jan. 10, 1995).

52 Sulzer Ltd., Docket C-3559 (Feb. 23, 1995).

53 Adobe Systems, Inc., Docket C-3536 (Oct. 18, 1994), Commissioner Owen dissenting.

54 Sensormatic Electronics Corp., Docket C-3572 (April 18, 1995), Commissioner Azcuenaga concurring in part and dissenting in part.

55 Service Corporation International, File 951-0012 (announced for public comment Feb. 28, 1995).

56 Red Apple Companies, Inc., Docket 9266 (Feb. 28, 1995); Penn Traffic Co., File 951-0009 (announced for public comment Jan. 18, 1995); Schnucks Markets, Inc., File 941-0131 (announced for public comment March 8, 1995); Schwegmann Giant Supermarkets, Inc., File 941-0130 (announced for public comment March 8, 1995).

57 Revco D.S., Inc., Docket C-3540 (Oct. 31, 1994); Rite Aid Corp., Docket C-3546 (Dec. 15, 1994).

58 Tele-Communications, Inc., Docket C-3575 (May 8, 1995).

59 Nestle Food Co., File 941-0124 (announced for public comment Dec. 28, 1994).

60 Del Monte Corp., Docket C-3569 (April 11, 1994), Commissioner Starek concurring.

61 Reckitt & Colman PLC, Docket C-3566 (April 4, 1995).

62 Red Apple Companies, Inc., Docket 9266 (Feb. 28, 1995).

63 American Home Products Corp., Docket C-3557 (Feb. 14, 1995), Commissioner Azcuenaga concurring in part and dissenting in part, on the ground that the order was inadequate to remedy the alleged competitive harm.

64 Glaxo plc, File 951-0054 (announced for public comment March 16, 1995).

65 Sensormatics Electronics Corp., Docket C-3572 (April 18, 1995), Commissioner Azcuenaga concurring in part and dissenting in part.

66 The Commission also alleged R&D markets in Boston Scientific and Wright Medical Technology, discussed below. See also Glaxo plc, File 951-0054 (March 15, 1995); Royal Dutch Petroleum Co., File 941-0043 (Jan. 10, 1995); Roche Holding Ltd., Docket C-3542 (Aug. 24, 1994).

67 R&D mergers may benefit innovation by eliminating redundancies, combining complementary assets or creating synergies. See Gilbert & Sunshine, "Incorporating Dynamic Efficiency Concerns in Merger Analysis: The Use of Innovation Markets," 63 Antitrust L.J. 569, 594 (1995).

68 Hartman, Teece, Mitchell & Jorde, "Assessing Market Power in Regimes of Rapid Technological Change," 2 Indus. & Corp. Change 317 (1993). To account for performance and price competition, the authors suggest 25% and 4 years for defining markets to supplement the existing 5% and 1- and 2-year periods.

69 Id. at 322-23.

70 See Antitrust Guidelines for the Licensing and Acquisition of Intellectual Property 3.2.3 (April 6, 1995) ("If the capacity for research and development activity . . . is scarce and can be associated with identifiable specialized assets or characteristics of specific firms . . . it may be appropriate to consider separately the impact of the conduct in question on competition in research and development among those firms.").

71 Hartman, supra note 68, at 340.