HOME

TheInfoList



OR:

Merger guidelines in the United States are a set of internal rules promulgated by the Antitrust Division of the
Department of Justice A justice ministry, ministry of justice, or department of justice is a ministry or other government agency in charge of the administration of justice. The ministry or department is often headed by a minister of justice (minister for justice in a ...
(DOJ) in conjunction with the
Federal Trade Commission The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) antitrust law and the promotion of consumer protection. The FTC shares jurisdiction ov ...
(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 potential
merger Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...
. Grounds for challenges include increased
market concentration In economics, market concentration is a function of the number of firms and their respective shares of the total production (alternatively, total capacity or total reserves) in a market. In any industry, a handful of firms that hold a significa ...
and threat to
competition Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, indivi ...
within a
relevant market In competition law, a relevant market is a market in which a particular product or service is sold. It is the intersection of a relevant product market and a relevant geographic market. The European Commission defines a relevant market and its pro ...
. The merger guidelines have sections governing both
horizontal integration Horizontal integration is the process of a company increasing production of goods or services at the same part of the supply chain. A company may do this via internal expansion, acquisition or merger. The process can lead to monopoly if a co ...
and
vertical integration In microeconomics, management and international political economy, vertical integration is a term that describes the arrangement in which the supply chain of a company is integrated and owned by that company. Usually each member of the supply ...
.


History

The first merger guidelines set forth by the DOJ were the 1968 Merger Guidelines. The guidelines were developed by former U.S. Assistant Attorney General Dr. Donald Turner, an
economist An economist is a professional and practitioner in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this field there are ...
and lawyer with expertise in the field of
industrial organization In economics, industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and markets. Industrial organization adds real-world complications to the pe ...
.Oliver E. Williamson, The Merger Guidelines of the U.S. Department of Justice-In Perspective
Accessed November 4, 2007.
These merger guidelines were criticized in some quarters for excess concern with issues of market structure such as
barriers to entry In theories of competition in economics, a barrier to entry, or an economic barrier to entry, is a fixed cost that must be incurred by a new entrant, regardless of production or sales activities, into a market that incumbents do not have or hav ...
and
concentration ratio In economics, concentration ratios are used to quantify market concentration and are based on companies' market shares in a given industry. Market share can be defined as a firm's proportion of total sales in an industry, a firm's market capit ...
s at the expense of efficiency and
economies of scale In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables a ...
.Remarks of Assistant Attorney General Charles A. James
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 of
industrial organization In economics, industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and markets. Industrial organization adds real-world complications to the pe ...
. They remained largely unchanged until 1982 when Associate Attorney General Bill Baxter, under the authority of
U.S. Attorney General The United States attorney general (AG) is the head of the United States Department of Justice, and is the chief law enforcement officer of the federal government of the United States. The attorney general serves as the principal advisor to the p ...
William French Smith William French Smith II (August 26, 1917 – October 29, 1990) was an American lawyer and the 74th United States Attorney General. After attaining his law degree from Harvard Law School in 1942, Smith went on to join the law firm of Gibson, D ...
, released a new set of guidelines, which made heavier use of modern concepts of
microeconomic theory Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics foc ...
, including using the Herfindahl index to measure
market concentration In economics, market concentration is a function of the number of firms and their respective shares of the total production (alternatively, total capacity or total reserves) in a market. In any industry, a handful of firms that hold a significa ...
. The newer guidelines took a more favorable view of
economies of scale In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables a ...
and efficiency of production as rationales for integration. 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. This approach was controversial: some antitrust lawyers saw it as a loosening of previous restraints on corporate consolidation, and some
State Attorneys General The state attorney general in each of the 50 U.S. states, of the federal district, or of any of the territories is the chief legal advisor to the state government and the state's chief law enforcement officer. In some states, the attorney gener ...
responded to Baxter's changes by tightening merger enforcement at the state level. The guidelines were revised again in 1984. The only portion of the 1984 guidelines that remains in effect i
Section Four
which governs the examination of market effects of
vertical integration In microeconomics, management and international political economy, vertical integration is a term that describes the arrangement in which the supply chain of a company is integrated and owned by that company. Usually each member of the supply ...
. These guidelines were replaced by the 1992 Merger Guidelines, which fine-tuned previously established tools and policies, such as the SSNIP test and rules governing the acquisition of failing firms. The 1992 Guidelines were revised in 1997, almost concurrently with the FTC's challenge of the Staples-
Office Depot The ODP Corporation is an American office supply holding company headquartered in Boca Raton, Florida. The company has combined annual sales of approximately $11 billion, and employs about 38,000 associates with businesses in the United States. ...
merger in federal court. The 1997 Horizontal Merger Guidelines were replaced on August 19, 2010.2010 Horizontal Merger Guidelines
/ref> 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, attracted criticism from
law and economics Law and economics, or economic analysis of law, is the application of microeconomic theory to the analysis of law, which emerged primarily from scholars of the Chicago school of economics. Economic concepts are used to explain the effects of laws, ...
scholars who contend that they do not update efficiencies analysis, that they may not be recognized by the courts and that they do not embody principles that reflect dynamic competition.''See'' J. Gregory Sidak & David J. Teece, ''Rewriting the Horizontal Merger Guidelines in the Name of Dynamic Competition'', 16 GEO. MASON L. REV. 885 (2009), https://www.criterioneconomics.com/docs/rewriting-horizontal-merger.pdf.


Notes

{{Reflist


See also

*
United States antitrust law In the United States, antitrust law is a collection of mostly federal laws that regulate the conduct and organization of businesses to promote competition and prevent unjustified monopolies. The three main U.S. antitrust statutes are the Sherma ...
*
Second request (law) In United States antitrust law, a second request is a discovery procedure by which the Federal Trade Commission and the Antitrust Division of the Justice Department investigate mergers and acquisitions which may have anticompetitive consequences ...


External links

*Merger guidelines documents:
''1968 Merger Guidelines''








** ttp://www.usdoj.gov/atr/hmerger/11251.htm ''1997 Merger Guidelines''
''2010 Horizontal Merger Guidelines''FTC International antitrust coordinator Debra Valentine
Mergers and acquisitions United States antitrust law