Horizontal Merger Guidelines Review Project
Question 9, Screening Thresholds: The HHI-based screening thresholds in the Horizontal Merger Guidelines should be increased. Based on the merger challenge data published by the Federal Trade Commission, the cut-off for a moderately concentrated market should be increased to at least 2,000. The presumption that all mergers in highly concentrated markets with HHI increases over 100 are likely to create or enhance market power or facilitate its exercise should be dropped and instead these mergers should be described as potentially raising significant competitive concerns, depending on the factors set forth in Sections 2 - 5 of the Guidelines. If a presumption of likely competitive harm is retained, it should be subject to a substantially higher post-merger HHI threshold than is presently the case. This will result in Guidelines that more closely reflect Agency practice. Question 18, Merger Remedies: The Department of Justice and Federal Trade Commission have issued several joint antitrust enforcement policy statements in addition to the Guidelines. Policy statements regarding remedies are a notable exception, however. The DOJ released its "Antitrust Division Policy Guide to Merger Remedies" in October 2004, and the FTC's guidance regarding remedies is detailed in a Merger Best Practices Statement from the Bureau of Competition issued in April 2003. In addition, the Bureau of Competition issued a second Merger Best Practices Statement that discusses 45 frequently asked questions about merger remedies. Neither of these FTC documents is a policy statement from the Commission. The Guidelines do not contain any description of the approach taken by the Agencies to assess the adequacy of proposed remedies, and the DOJ and FTC documents described above provide high-level statements but little detail regarding how the Agencies assess remedies. Even so, remedies are an important part of merger analysis and are evaluated often, the number of merger cases that are settled with remedies is large relative to the number of merger cases that are litigated by the Agencies. One goal of an update of the Guidelines is to "more accurately and clearly describe current Agency practice." Due to the limited guidance publicly available on the analytical framework used by the Agencies to evaluate remedies, and with the frequency with which the Agencies evaluate remedies, remedies should be part of any Guidelines update. I have been working on merger analyses for over 18 years, both as an Economist with the Department of Justice and as an economic consultant to private parties. Based on this experience, my view is that adding a discussion of the evaluation of potential merger remedies to the Guidelines is one of the most important areas where a revision can enhance the efficiency of the U.S. merger review process. Businesses contemplating a remedy to a merger under investigation, and also contemplating whether to propose a merger that ultimately may require remedies, will gain by having additional guidance and understanding of how the Agencies will evaluate their remedy proposals. In addition to adding a discussion of the evaluation of remedies to the Guidelines, the Agencies should consider amending the Commentary to discuss examples of actual remedies evaluated. Consistent with the overall approach taken by the Commentary, these examples would highlight specific issues analyzed during the review of the remedy, such as considerations of financial viability and whether the divestiture of less than the full business of one of the merging firms is sufficient to restore lost competition. Though confidentiality concerns may prevent the Agencies from describing publicly examples of remedies that have been rejected, they should be able to provide meaningful guidance based on examples of remedies that have been accepted. More detailed discussions of these responses to Questions 9 and 18 are included in the attached notes.