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Ten Years of the 2010 HMG: A Perspective from the Department of Justice

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Abstract

Ten years after their release, the 2010 Horizontal Merger Guidelines continue to reflect accurately current legal and economic principles of antitrust. Despite fears to the contrary, the Antitrust Division still relies on market shares and concentration—along with a wide range of other evidence—to determine whether a merger is likely to harm competition substantially. Similarly, market definition remains an essential ingredient to merger analysis, combining the quantitative rigor of the hypothetical monopolist test with the kinds of qualitative evidence that date back to Brown Shoe. The 2010 Horizontal Merger Guidelines have also contributed to courts’ increasing acceptance of the standard economic tools that are used to quantify the potential impact of horizontal mergers, including merger simulation and upward pricing pressure.

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Notes

  1. See, for example, the 2006 Commentary on the Horizontal Merger Guidelines, available at: https://www.justice.gov/atr/commentary-horizontal-merger-guidelines.

  2. Additional information about the Division’s enforcement actions, as well as abandonments, is available in the Hart-Scott-Rodino Annual Reports, archived at: https://www.ftc.gov/policy/reports/policy-reports/annual-competition-reports.

  3. 2010 HMG at 7.

  4. 2010 HMG at 21.

  5. Varney (2010).

  6. Shapiro (2010).

  7. This concern arose despite the fact that the 2010 HMG increased the concentration thresholds for establishing a presumption of adverse competitive effects. Some may have expected this change to indicate that the Agencies would be less likely to challenge mergers where the levels or changes in concentration fell in between the old thresholds and the new ones. In fact, however, even before the release of the 2010 HMG, mergers with such characteristics were already unlikely to be challenged. Indeed, this was largely the rationale for raising the thresholds in the revision—namely, to more accurately reflect the existing practices of the Agencies.

  8. Hughes Hubbard Antitrust Practice Group (2010).

  9. U.S. v. H & R Block, Inc., et al., 789 F. Supp. 2d 74 (D.C. 2011).

  10. Pozen (2011).

  11. U.S. v. BazaarVoice, Inc., Dist. Court, N.D. Cal. 2014. Citations omitted. Recent scholarship provides further support for the idea that the change in HHI, rather than its level, is important in screening horizontal mergers for unilateral effects. See Nocke and Whinston (2020).

  12. Baer (2014).

  13. U.S. v. Anthem, Inc., 236 F. Supp. 3d 171 - Dist. Court, Dist. of Columbia 2017. Citations omitted.

  14. U.S. v. Aetna Inc., 240 F. Supp. 3d 1 - Dist. Court, Dist. of Columbia 2017.

  15. U.S. v. Anthem, Inc., 855 F. 3d 345 - Court of Appeals, Dist. of Columbia Circuit 2017.

  16. Hovenkamp and Shapiro (2017).

  17. Hill and Waehrer (2019).

  18. U.S. v. BazaarVoice, Inc., Dist. Court, N.D. Cal. 2014, Findings of Fact 282.

  19. HMG at 3. Anticompetitive price effects may sometimes be slow to appear after a consummated merger for other reasons as well. For example, if the anticompetitive mechanism is a slowing of capacity investment, price effects may not become apparent immediately after a merger.

  20. This transaction was a joint venture, rather than a merger or acquisition (and for this reason does not appear in Table 1 above), but as with many joint ventures that are formed by competitors, the Division analyzed it using the same standards that are described in the 2010 HMG.

  21. Competitive Impact Statement, U.S. and State of New York v. Twin America, LLC, et al, March 16, 2015.

  22. HMG at 3.

  23. Complaint, U.S. v. Energy Solutions Inc., et al., Nov. 11, 2016.

  24. Testimony of John Mayo, quoted in Plaintiff’s Closing Argument, Energy Solutions Inc., et al., May 5, 2017: https://www.justice.gov/atr/case-document/file/964601/download.

  25. Opinion, U.S. v. Energy Solutions Inc., et al., July 12, 2017.

  26. Complaint, U.S. v. Deere & Company, et al, Aug. 8, 2016.

  27. Complaint, U.S. and Plaintiff States v. Aetna Inc., and Humana Inc., July 21, 2016.

  28. U.S. v. BazaarVoice, Inc., Dist. Court, N.D. Cal. 2014.

  29. Demonstrative/Summary Exhibit Used with Direct Testimony of Michael Whinston, Public Version, U.S. v. AB Electrolux et al., Nov. 23, 2015: https://www.justice.gov/atr/file/ge-px02015/download.

  30. Complaint, U.S. v. H&R Block, Inc. et al., May 23, 2011.

  31. Complaint, U.S. and Plaintiff States v. AT&T Inc., et al, August 31, 2011.

  32. Complaint, U.S. v. Anheuser-Busch InBev SA/NV and Grupo Modelo S.A.B. de C.V., Jan. 31, 2013.

  33. Complaint, U.S. et al. v. US Airways Group, Inc. and AMR Corp., Aug. 13, 2013.

  34. Competitive Impact Statement, U.S. v. Bayer AG, et al., May 29, 2018.

  35. Stone and Wright (2011).

  36. 1992 HMG, §1.11.

  37. See, e.g., Werden (1992): “The Guidelines’ Smallest Market Principle states that the one and only relevant market for the antitrust market subsequence and the corresponding candidate market sequence ‘generally’ is the smallest element in the antitrust market subsequence.”

  38. See, e.g., Katz and Shapiro (2003): “[T]he relevant markets defined using the procedures described here, while faithful to the Merger Guidelines, may appear to be ‘too narrow’ to some observers. In particular, these methods may lead to markets that are narrower than would be implied using the less formal ‘reasonable substitutes’ standard that courts sometimes employ.”.

  39. U.S. v. H&R Block, Inc., 833 F. Supp. 2d 36 - Dist. Court, Dist. of Columbia 2011.

  40. U.S. v. Aetna Inc., 240 F. Supp. 3d 1 - Dist. Court, Dist. of Columbia 2017.

  41. Gelfand (2014).

  42. U.S. v. Bazaarvoice, Inc., Dist. Court, ND California 2014 (citations omitted).

  43. United States’ Pretrial Memorandum [Public Redacted Version], U.S. v. AB Electrolux, et al., Dec. 18, 2015. Emphasis added.

  44. Demonstrative/Summary Exhibit Used with Direct Testimony of Michael Whinston, U.S. v. AB Electrolux, et al., Nov. 23, 2015.

  45. This issue has been around at least since Brown Shoe, when the Supreme Court held that it “would be unrealistic to accept Brown’s contention that, for example, men’s shoes selling below $8.99 are in a different product market from those selling above $9.00.” Brown Shoe Co. v. United States, 370 U.S. 294 (1962).

  46. U.S. v. Energy Solutions, Inc., 265 F. Supp. 3d 415 - Dist. Court, D. Delaware 2017 at 40.

  47. 2010 HMG at 21. “Where sufficient data are available, the Agencies may construct economic models designed to quantify the unilateral price effects resulting from the merger.”

  48. See, e.g., Werden (1996).

  49. Farrell and Shapiro (2010).

  50. U.S. v. H&R Block, Inc., 833 F. Supp. 2d 36 - Dist. Court, Dist. of Columbia 2011.

  51. U.S. v. Aetna Inc., 240 F. Supp. 3d 1 - Dist. Court, Dist. of Columbia 2017.

  52. U.S. v. Anthem, Inc., 236 F. Supp. 3d 171 - Dist. Court, Dist. of Columbia 2017.

  53. See, e.g., Werden (1997).

  54. Farrell and Shapiro (2010).

  55. Trial exhibit of Michael Whinston in U.S. v. AB Electrolux, Electrolux North America, Inc., and General Electric, Co. Public version, https://www.justice.gov/atr/file/ge-px02015/download.

  56. See Miller and Sheu (2020).

  57. U.S. v. H&R Block, Inc., 833 F. Supp. 2d 36 - Dist. Court, Dist. of Columbia 2011, quoting FTC v. Swedish Match, 131 F. Supp. 2d 151 (D.C. 2000).

  58. Drennan et al. (2013).

  59. For a formal analysis of these issues, see Chen and Schwartz (2016).

  60. US v. H&R Block, Inc., 833 F. Supp. 2d 36 - Dist. Court, Dist. of Columbia 2011.

  61. Majure and Scott Morton (2012).

  62. Sometimes the diversion ratios are adjusted slightly to reflect some degree of substitution to products outside the relevant market, in which case the calculation requires an aggregate or market elasticity in addition to market shares.

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  1. Antitrust Division, U.S. Department of Justice, 950 Pennsylvania Avenue, NW, Room 3109, Washington, DC, 20530, USA

    Craig T. Peters & Jeffrey M. Wilder

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Peters, C.T., Wilder, J.M. Ten Years of the 2010 HMG: A Perspective from the Department of Justice . Rev Ind Organ 58, 13–31 (2021). https://doi.org/10.1007/s11151-020-09799-3

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