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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I’m confident that my esteemed colleagues, who have far more expertise about the merger guidelines than I, will offer all sorts of terrific ideas for revising the substance of the guidelines. While I would certainly advocate a few specific changes (i.e., revise the HHI thresholds to reflect actual agency practice), I’ll leave the devilish details to the experts and concentrate on one “modest” (quite literally!) revision…

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I feel no great urgency to revise the Guidelines.  True enough, they’re more of an analytical thought experiment than an accurate description of how merger review takes place in the agencies, but who’s really fooled?  Perhaps some business people think that the Guidelines are a computer program waiting for the introduction of the relevant data to spit out the answer, but most sophisticated executives contemplating a merger will understand that the Guidelines are just a beginning point for conversation.

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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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1. Chairman Leibowitz in his Fordham speech last month stated “From my perspective, the current Guidelines do not explain clearly enough to businesses how the agencies review transactions.” Won’t that always be the case? In a specialized area of complex regulatory law, there is whatever guidelines an agency (or in our case agencies) will promulgate and then small group of insider lawyers who will have enough repeat business to really understand the meaning of the guidelines via their agency contacts. For others, the guidelines will remain unclear unless you create a 600 page set of merger guidelines – not a good idea.

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My sense is that there is no need to revise the DOJ/FTC Horizontal Merger Guidelines, with one exception.  As Greg Werden points out, “a thorough revision would take up to three years and occupy some of the agencies’ best people for a total of more than two thousand hours.”

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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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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.

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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.

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