Judicial Response to the 2010 Horizontal Merger Guidelines

Carl Shapiro,Howard Shelanski

doi:10.1007/s11151-020-09802-x

Carl Shapiro, Howard Shelanski

Open Access

https://doi.org/10.1007/s11151-020-09802-x

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Abstract

We study how the courts have responded to the 2010 Horizontal Merger Guidelines issued by the U.S. Department of Justice and the Federal Trade Commission. Looking at decided cases, we find that both the government and merging parties rely on the 2010 Guidelines in presenting their cases, each side respectively arguing that it should win if the court properly follows them. The 2010 Guidelines had the strongest effect on the case law in the area of unilateral effects, where a number of courts have embraced them in ways that clearly depart from earlier decisions. The case law now exhibits much greater receptivity to a government showing that the merger will lead to higher prices simply due to the loss of direct competition between the two merging firms. The courts also have followed the 2010 Guidelines by more willingly defining markets around targeted customers. We do not detect any effect on decided cases of the higher concentration thresholds found in the 2010 Guidelines. Both the average pre-merger level of market concentration and the average increase in market concentration alleged by the government in litigated cases to date declined after 2010.

Highlights

We study how the courts have responded to the 2010 Horizontal Merger Guidelines (2010 Guidelines, or Guidelines, or 2010 HMGs) that were issued by the U.S Department of Justice (DOJ) and the Federal Trade Commission (“FTC”)
In this paper we have tried to assess how specific innovations found in the 2010 HMGs have fared in the courts
Because the HMGs are intended to reflect agency practices and because merger review is a significant activity of the FTC and DOJ, we would expect over time to see those practices inform litigation positions that the agencies take before the courts and, in turn, to see the courts either incorporate or reject aspects of those practices

Summary

Introduction

Former senior DOJ official Deborah Garza read the -new Guidelines to “abandon the analytical framework of prior guidelines in favor of describing principal analytical techniques and types of evidence used to assess a merger.” She interpreted the new Guidelines as “throwing out the structural screens of the older guidelines,” despite the fact that Section 5.3 of the 2010 HMGs embraces the structural presumption She predicted that “the very efforts the agencies have made to diminish the significance of market shares and concentration should make it more difficult to rely on them in court.”. These tools focus on direct competition between the products that are sold by the merging firms (diversion ratios) and the impact of internalizing that competition (price/cost margins) and can involve full-blown merger simulation Judicial acceptance of these methods was in doubt in 2010 when the FTC and DOJ updated the Guidelines to address and explain assessment of unilateral effects more directly. Made it harder for merging firms to mount an entry defense in the absence of actual, recent, and successful instances of entry

Universe of Decided Cases

Impact of the 2010 Guidelines on Judicial Decisions

Findings

Conclusions