Herbert Hovenkamp on Revising the Merger Guidelines
- 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.