Safe Harbours in Merger Guidelines: What Should They Be?

Abstract

Safe harbours in merger guidelines define post-merger market concentration or concentration change thresholds below which proposed mergers are unlikely to be anti-competitive; anti-competitiveness is usually measured as a ‘substantial lessening of competition’. Yet competition agencies have different safe harbours. We used merger models to run many simulations involving a wide range of market structures and merger-induced aggregations. The post-merger unilateral price increases in these scenarios were used to gauge what the safe harbours should be to keep price increases below a specified threshold. The safe harbour thresholds commonly used were found typically to be too restrictive, in that they failed to screen out mergers that were almost certainly competitively benign.