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In light of the DOJ/FTC announcement of workshops to explore possible revisions to the Merger Guidelines in December 2009 and January 2010, TOTM is organizing a symposium on the legal and economic issues associated with the Guidelines.  In particular, we’ve asked a panel of a dozen or so of the leading antitrust lawyers and economists to address the following questions:

1.  Do the Merger Guidelines Need Revision?

2. If yes, what is the most important revision that you would recommend and why?

The agencies have questions.  Our panel has answers.  And we hope the panelists posts will kick off discussion in the comments both between participants and our readders.

Come check out the TOTM Merger Guidelines Symposium on Monday, October 26.

We’ve arranged a great lineup which includes practitioners, law professors and economists, including a number with experience at the agencies so we should get a number of different perspectives.  If you’re interested in participating please feel free to contact me via email in the next week or so.

The merger guidelines should be revised, not only to provide clearer guidance, but because the current version makes it harder for the agencies to win cases when they do challenge a merger.  The reason is that the guidelines often don’t fit actual agency practice or modern economic theory.  For example, part of the reason the DOJ lost the Oracle/Peoplesoft merger case was that its guidelines on unilateral effects do not match modern practice or theory.  Such a mismatch makes it harder to convince judges that merger enforcement satisfies traditional rule of law concerns about providing advance notice of legal standards that are clear enough to guide private conduct and meaningfully constrain legal discretion.  Here are the areas on which I would focus.

Read the full piece here.

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.

I think this symposium is a terrific idea and thank Josh Wright for organizing it.  As Chairman Leibowitz and AAG Varney said, we want to have as open a process as possible as we explore whether to update the HMG and, if so, how.   There can hardly be a more open place for a symposium than on the blogosphere.  I anticipate that there will be a wide array of responses and comments posted here, and we will be reading with great interest.

Read the full piece here.

The Horizontal Merger Guidelines are the intellectual cornerstone of modern antitrust law, yet they contain little discussion of innovation or dynamic competition. Although the Merger Guidelines do not constitute law merely by virtue of their promulgation by the agencies, the courts previously have accepted the revised principles that the agencies have advocated. By embracing the reasoning in the Merger Guidelines promulgated several decades ago by the Antitrust Division and the Federal Trade Commission, the federal courts have caused antitrust case law to ossify around a decidedly static view of antitrust. Put differently, in the years since 1980 the Division and the FTC have successfully persuaded the courts to adopt a more explicitly economic approach to merger analysis, yet one that has a static view of competition. The result is not a mere policy preference. It is law. To change that law to have a more dynamic view of competition will therefore require a sustained intellectual effort by the enforcement
agencies (as well as by scholars and practitioners) that, once more, engages the courts to reexamine antitrust law as they did in the late 1970s during the ascendancy of the Chicago School, when antitrust law became infused with its current, static understanding of competition. It appears that, before the Obama Administration took office, the Antitrust Division was attempting to incorporate more dynamic analysis, but the result was inconsistent across different mergers and different doctrinal areas of antitrust law.

Read the full piece here.

1. Do the Guidelines need revision?

The Horizontal Merger Guidelines have served a very valuable purpose by making horizontal merger analysis much more sensible than it was prior to the 1980s.There is much less disagreement about horizontal merger policy than there is about vertical antitrust policy so some vertical guidelines would be especially welcome. Nevertheless, despite the lack of widespread disagreement about horizontal merger policy, it is desirable, though not critical, to improve the horizontal guidelines, making sure that they are up to date and relevant. I would be reluctant to change them significantly because they have served a valuable purpose by providing a consistent and durable framework for merger analysis primarily by focusing attention on the right questions to ask in merger analysis, namely how will price and competition be affected post merger.

Read the full piece here.

The Horizontal Merger Guidelines have brought discipline to the unruly world of merger analysis; but have also accommodated advances in our understanding of the myriad ways in which firms compete and how mergers affect such competition.  However, in cases where there is better information about the effects of the merger than there is about the relevant market, I would change the Guidelines to allow analysis that bypasses market delineation.

Read the full piece here.

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.

Read the full piece here.

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.

Read the full piece here.