The proportionality of merger remedies in differentiated product markets

Abstract

Horizontal mergers that raise competition concerns may require divestitures that eliminate the identified concerns. At the same time, divestitures should be proportionate, not going above and beyond what is necessary to eliminate the identified concerns. In this article, we argue that in differentiated product markets out-of-market substitutes exert stronger competitive pressure on some products within the relevant product market than on others. As a result, a divestiture of products that are subject to strong competitive pressure from out-of-market substitutes may not be needed if other products that are subject to weaker competitive pressure are divested. A simplistic solution that requires divestitures in all areas of horizontal overlap could result in overly broad remedies that violate the proportionality principle.