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News items continue to pile up suggesting that the FTC is likely to challenge Google’s acquisition of mobile application and website advertising provider, AdMob. See this recent article from the Wall Street Journal and this from Yahoo!, for example.

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Yesterday the final Horizontal Merger Guidelines Review workshop was held and, among other antitrust luminaries, our own Josh Wright participated.  We look forward to a report from the front lines.

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Thanks to all of our participants in the Merger Guidelines Symposium.  We hope many of you, as well as our readers, will look back over the collected posts and engage in an ongoing dialogue in the comments over the many interesting ideas raised here.  You will find all of the posts from the symposium by clicking on the “merger guidelines symposium” link to the right, under the “blog symposia” heading.  For you reference, we have also collected all of the posts below.

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Do the Merger Guidelines need revision? No.  Thanks for having me.

OK. Yes–and market definition/market shares, and in particular the effective incorporation of supply-side effects, seem to me like the most pressing issues in need of attention.

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1. Yes, the Merger Guidelines should be revised; in particular:

a.  The discussion of concentration thresholds for collusion facilitating mergers must be aligned more closely with both recent case law and actual enforcement practices; otherwise they fail to provide guidance.  The current Guidelines indicate that concentrations greater than 1800 HHI and a post-merger increase exceeding 100HHI presumptively indicates a challenge. In fact, mergers with post-merger HHIs in excess of both these numbers are routinely permitted. While the standards in the current Guidelines are too aggressive, the George W. Bush administration policy was too lenient.  More fundamentally, the HHI creates an illusion of precision in coordinated effects analysis that is simply not warranted, particularly not when market definitions are ambiguous or when the merger market is subject to product differentiation.  Further, the “other factors” portion of the Guidelines tends to dominate the analysis.  A better approach is reduced reliance on the HHI and more on simpler observations about who the 3 or 4 largest firms in the market are, the effects of eliminating the acquired firm as an independent market entity, and the likely responses of rivals to an output reduction by the post-merger firm.

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Yes, the Merger Guidelines should be revised.

The Guidelines primary purpose is to “articulate the analytical framework the Agency applies in determining whether a merger is likely substantially to lessen competition.”   While the Guidelines have been very successful in articulating a useful economic framework for analyzing mergers, their performance in terms of satisfying that goal has been largely mediocre.   If the goal articulated by the Guidelines is an important one, and I do believe that providing some modicum of legal certainty to businesses contemplating merger decisions is valuable goal, then the Merger Guidelines do need revising in order to fulfill their purpose.

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Of course, the Merger Guidelines need to be updated.  Except for efficiencies, they haven’t been updated in 17 years.   Lawyers and economists with a regular antitrust practice may not require an update in light of their knowledge of the 2006 Commentary, speeches and agency experience.  But, the rest of the antitrust world does.  The most obvious audience is the courts, who should know what the agencies believe is best practice.  Moreover, as FTC Commissioner Kovacic has stressed, the world marketplace for antitrust ideas needs to have the guidance of the US enforcement agencies.  They should not have to ferret it out from commentaries and speeches.  The Merger Guidelines have been the most emulated feature of US antitrust enforcement worldwide.  It would be shame to squander the leadership role.

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The stated purpose of the DOJ/FTC Horizontal Merger Guidelines is to “reduce the uncertainty associated with enforcement of the antitrust laws.”  The Guidelines have had limited success in achieving this goal. They generally succeed in two important dimensions and fail in one. First, the Guidelines lay out a five step analysis consisting of market definition, market shares, potential adverse effects, entry, and efficiencies. The procedure is generally consistent with practice, it is a reasonable way to parse the set of issues, and thus provides some real guidance. Second, the Guidelines explain how the Agencies view the economic issues associated with each of these five steps and define broad standards. This is also useful.  The Guidelines describe, for example, that the Agencies evaluate entry on a timely, likely and sufficiency standard and explain the meaning of these standards. This type of content helps parties understand the Agencies’ approach and can reduce uncertainty. There are places where these standards are appropriate and reflect practice and other places where they can be improved.

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1.  Do the Merger Guidelines Need Revision?

Yes.  Conceptually, the current Guidelines incorporate multiple strands of intellectual and legal history with respect to merger analysis that have been layered one upon the other over time, but never effectively integrated.  This now encumbers the application of the Guidelines and may be inhibiting the government’s capacity to effectively and efficiently initiate merger challenges.

Read the full piece here.