Thank you, Charles, for your kind introduction. It's a great pleasure to work with you, and a privilege to be here today to commemorate the twentieth anniversary of the 1982 Department of Justice Merger Guidelines.
When I became Director of the FTC's Bureau of Competition in April 1983, I had the great honor and privilege of spending hours with Bill Baxter, exploring a variety of antitrust issues. I learned much from his powerful mind. One of Bill's great strengths was as a teacher - something that, fortunately, despite his other successes, he never gave up. In 1984, shortly after he left the Antitrust Division, he was quoted as stating that the FTC "is in its Periclean Age in terms of economic sophistication."(1) Although I was first much pleased with his remark, I then remembered that at the end of that age, Pericles was deposed, fined, and died shortly thereafter. When I later asked him if he was trying to deliver a more complex message with his quote, Bill just smiled.
When we speak of turning points in our antitrust experience, we usually discuss cases that have shaped doctrine. We often focus on judicial decisions such as GTE Sylvania(2) that have determined the substance of antitrust rules.(3) When scholars write the history of the modern antitrust system, such doctrinal landmarks will receive their due. Today, we celebrate the twentieth anniversary of a non-litigation event that deserves equal attention. The Justice Department's 1982 Merger Guidelines(4) fundamentally changed the way we think about mergers and about how we should formulate competition policy.(5) Not simply a matter of national significance, the analytical ripples of the 1982 Merger Guidelines have covered the globe.
Anniversaries are useful occasions not merely to recall the past but also to consider the future. What does our experience with the 1982 Merger Guidelines tell us about the way ahead for competition policy? Three major lessons stand out.
The Benefits of Transparency
First, the Guidelines demonstrated the value of transparency - having public antitrust authorities clearly state their enforcement attentions, even at the risk of relinquishing the capacity to employ enforcement approaches that well-specified guidelines might disavow or disfavor. Experience with the 1982 Merger Guidelines has shown how the quality of policy improves when public officials specify clearly the bases on which they exercise their authority.(6)
The Role of Self-Limiting Principles
Second, the design and implementation of the 1982 Merger Guidelines reveal that formulating sensible antitrust policy requires continuing efforts to ensure that current practice reflects the best possible understanding of economics and law. Fidelity to this principle sometimes will lead to contractions and other times to extensions of the boundaries of enforcement. As Donald Turner had done fourteen years earlier in the 1968 Department of Justice Merger Guidelines,(7) Bill Baxter confounded the conventional view that a government official always should expand, and never should surrender, possible enforcement terrain. Baxter proved a paradox of public policy: By adopting self-limiting measures that properly circumscribe the zone of anticipated activity, a government agency can increase the legitimacy and effectiveness of its enforcement program.
The Power of Ideas
Third, experience with the 1982 Merger Guidelines underscores the power of an intellectually sound approach to antitrust policy. The Guidelines lack the force of law. They formally bind no one - not the courts, not other countries, not even the Department of Justice. Yet they have exerted enormous influence on the antitrust enforcement community(8) and the courts(9) in the United States. Many other nations have emulated them in designing their own merger control regimes.(10) Nothing can be said to have "compelled" this result, save the power of the ideas embodied in the Merger Guidelines.
The controversy that greeted the Merger Guidelines' promulgation in 1982 is further testament to their analytical power. Twenty years later, we may forget that many - including some who now praise the methodology - severely castigated the new Merger Guidelines and their authors.(11) Antitrust law was abandoned, we were told, and the resulting flood led to what then seemed liked a historic merger wave. We were told that "like Halley's Comet, once in every 100 years, when the moon is full, we all take a binge on free market theories."(12) Viewed from the first decade of a new century, with the Merger Guidelines widely praised and emulated, and with a merger wave that dwarfed the one that occurred in the 1980s having just ended, how quaint the criticism now seems.
At home and abroad, the U.S. federal antitrust agencies coexist with many institutions that mold the legal environment governing business behavior. The impact of the 1982 Merger Guidelines shows that a single institution's investments in research and policy analysis have as much capacity to shape conceptions of antitrust policy - indeed, to foster adjustments in competition policy analysis around the globe - as the prosecution of cases. For the future, the strength of our theories and the quality of our supporting empirical research may serve as the most powerful means by which we affect the course of competition policy at home and abroad.
The merger guidelines initiative begun in June of 1982 continues to exercise considerable intellectual power because the 1982 Merger Guidelines were not frozen in time. The Justice Department issued its first merger guidelines in 1968, revised them in 1982, amended them further in 1984,(13) and, joined by the Federal Trade Commission, amended them again in 1992 and 1997.(14) Driving this evolution has been an institutional attentiveness to developments in theory and the lessons of practical experience. These Merger Guidelines will retain their vitality only if the federal agencies remain open to future adjustments informed by improvements in economic and legal learning, and if the agencies make efforts to analyze and learn from the results of past implementation.(15)
With today's gathering we recognize that good government is not an oxymoron, and that the dedicated service of individuals in government can make significant contributions to public policy. Today's honorees should be, and are, recognized not only for their participation in the creation and evolution of the Merger Guidelines, but also for other - and in many cases continuing - contributions to the antitrust dialogue.
1. Michael Isikoff, Chicago School Catches a Taxi: FTC Shifting Antitrust Activity From Big Business to Novel Areas, Wash. Post, June 17, 1984, at G1.
2. Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977).
3. See, e.g., William E. Kovacic & Carl Shapiro, Antitrust Policy: A Century of Economic and Legal Thinking, 14 J. Econ. Persps. 43 (Winter 2000) (discussing major developments in U.S. antitrust doctrine and the changes in economic learning that motivated judicial adjustments in legal rules).
4. U.S. Department of Justice, Merger Guidelines (1982), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,102.
5. See Thomas B. Leary, The Essential Stability of Merger Policy in the United States, 70 Antitrust L.J. (2002) (forthcoming) (documenting how the 1982 Merger Guidelines and related federal enforcement developments in the 1980s established the modern framework for merger analysis in the United States).
6. See William Blumenthal, Clear Agency Guidelines: Lessons 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).
7. See U.S. Department of Justice, Merger Guidelines (1968), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,101; see also Oliver E. Williamson, "The Merger Guidelines of the US Department of Justice" (June 2002) (paper prepared for the 20th Anniversary of the 1982 Merger guidelines) (analyzing the 1968 Department of Justice Merger Guidelines as a precursor to the 1982 Merger Guidelines and reviewing Donald Turner's role in formulating the 1968 Merger Guidelines).
8. See David Scheffman, Malcolm Coate & Louis Silvia, "20 Years of Merger Guidelines at the FTC: An Economic Perspective" (June 2002) (paper prepared for the 20th Anniversary of the 1982 Merger Guidelines) (describing how the 1982 Merger Guidelines influenced merger analysis conducted by the Federal Trade Commission).
9. Gregory J. Werden, "The 1982 Merger Guidelines and the Ascent of the Hypothetical Monopolist Paradigm" (June 2002) (paper prepared for the 20th Anniversary of the 1982 Merger Guidelines) (discussing how the 1982 Merger Guidelines have informed judicial views about market delineation in antitrust analysis).
10. See William J. Kolasky & Andrew R. Dick, "The Merger Guidelines and the Integration of Efficiencies into the Antitrust Review of Horizontal Mergers" (June 2002) (paper prepared for the 20th Anniversary of the 1982 Merger Guidelines) (discussing how the treatment of efficiencies in the 1982 Merger Guidelines and subsequent revisions has influenced thinking in other jurisdictions).
11. Commissioner Leary, supra note 4, retells much of this history.
12. Stephen M. Axinn, A Lawyer's Response, 52 Antitrust L.J. 643 (1983).
13. U.S. Department of Justice, Merger Guidelines (1984), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,103. As then-Director of the FTC's Bureau of Competition, Paul McGrath and his colleagues graciously allowed me to comment on their proposals as they developed them. I am also grateful to Jim Rill for allowing me to participate in the 1992 revisions to the Merger Guidelines as a consultant to the Antitrust Division.
14. U.S. Department of Justice & Federal Trade Commission, Horizontal Merger Guidelines, reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,104.
15. See Jonathan B. Baker, "Responding to Developments in Economics and the Courts: Entry in the Merger Guidelines" (June 2002) (paper prepared for the 20th Anniversary of the 1982 Merger Guidelines) (examining continuing evolution of the concept of entry in the federal merger guidelines and identifying areas for possible future refinements).