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Merger Guidelines

The Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission recently called for public comments to aid their revision of the Merger Guidelines. Those comments were due in April 2022 and many thousands of them are hosted on the agencies’ site.

This page, maintained by the Thurman Arnold Project at Yale, contains a small set of curated economic materials drawn from those public submissions. We have focused on comments from economists with research and policy experience, especially those that highlight relevant research findings. This selection of substantive and constructive comments will help agency staff and leaders reform the Guidelines to achieve more effective protection of competition and consumers.

The commenters are listed in alphabetical order, and each name is followed by the file of their comments as well as any supporting literature that was attached to the comment. The list below will continue to be curated and expanded by the TAP team over the summer of 2022.

The material raised by the commenters is re-organized in the table that follows. Each substantial topic forms a row. Relevant research papers that will aid reform of the Merger Guidelines on that topic are located in the columns of the table

Summaries of Selected Papers

Nancy L. Rose and Carl Shapiro
Link to Comment
Rose and Shapiro recommend revising the Horizontal Merger Guidelines to strengthen merger enforcement in three critical areas. First, they advocate applying the Hypothetical Monopolist Test to define narrow markets, consistent with how the Agencies treat unilateral price effects. Second, they recommend giving more emphasis to dynamic competition, including acquisitions of nascent competitors and competition to develop new products. Third, Rose and Shapiro suggest that the updated guidelines include a section on Mergers Between Competing Employers that explains how the Agencies handle mergers that harm workers by increasing the market power of employers.

American Antitrust Institute (AAI)
Link to Comment
The American Antitrust Institute addresses overarching aspects of merger policy as well as specific aspects of the 2010 Horizontal Merger Guidelines. The AAI urges that the revised guidelines explain settled principles and agency policy. The AAI fears that guidelines not well grounded in theoretical or empirical learning will substantially undermine effective merger enforcement. The AAI further recommends that the Agencies continue the practice of maintaining separate horizontal and vertical guidelines. Turning to specific issues, the AAI offers a number of recommendations, including these: (a) expand the discussion of buyer power and monopsony power in both product and labor markets; (b) explain how the markets will be defined in mergers involving digital platforms; and (c) provide more discussion of how the Agencies will evaluate acquisitions of nascent competitors. The AAI also urges the Agencies to address the connection between a decision to challenge a merger and the availability of effective merger remedies.

Chris Conlon
Link to Comment
Conlon describes the ways in which incorporating common ownership effects—based on the premise that owners of horizontal product competitors want to lessen competition because they internalize its impacts in their portfolios—would alter prospective merger evaluation. He shows that it would lead to poor enforcement to begin including common ownership in an HHI measure without a policy to account for the step up in market power that necessarily entails. Conlon suggests that the Agencies invest in collecting high-quality data about financial ownership to support future empirical studies., Conlon suggest moving beyond binary definitions of whether a firm is “in” or “out” of the relevant market and presents diversion ratios based on consumer data as a valuable alternative to strict market definition in econometric analysis.

Florian Ederer
Link to Comment | Cunningham et al., Killer Acquisitions
Informed by research on pharmaceutical acquisitions, Ederer’s paper Killer Acquisitions develops a theoretical model demonstrating how incumbent firms may have incentivizes to acquire  start-ups they predict will be future rivals in order to shut down their projects and suppress that competition. As the primary harm caused by “killer acquisitions” is to innovation, Ederer recommends that the revised HMGs place greater emphasis on the importance of innovation to consumer welfare. Additionally, as this innovation is typically generated by nascent competitors with small market shares, the HMGs should provide analytical alternatives to HHI thresholds for evaluating mergers of this type.

Leemore Dafny & Nancy Rose
Link to Comment | Capps et al., Physician Practice Consolidation Driven By Small Acquisitions, So Antitrust Agencies Have Few Tools To Intervene | Dafny et al., The Price Effects of Cross-Market Mergers: Theory and Evidence from the Hospital Industry
As consolidation in the healthcare market has been driven primarily by serial acquisitions of healthcare providers, Dafny recommends that the revised HMGs enable the Agencies to consider the relevant buyer’s acquisition history (and the cumulative effects of prior acquisitions) when reviewing a proposed merger. Second, Dafny’s 2019 study found that cross-market mergers—specifically, the acquisition of hospitals within the same state but outside of the buyer’s geographic market—translated to significant price increases ex-post. These mergers were not challenged by the Agencies because their relevant geographic markets did not overlap to the extent that the merger triggered the structural presumption. Therefore, Dafny advises that the Agencies emphasize the competitive effects of cross-market mergers over the formal delineation of relevant markets.

Martin Gaynor
Link to Comment
Professor Gaynor recommends that the DOJ and FTC review the empirical evidence on the impacts of mergers that has materialized in the last decade. The Agencies’ joint report would serve as a complement to the revised HMGs, establishing the evidentiary basis for the analysis of proposed mergers.

Nathan Miller
Link to Comment | Caradonna et al., Mergers, Entry, and Consumer Welfare
Miller addresses the treatment of repositioning and entry in merger review. Miller’s recent research with Peter Caradonna and Gloria Sheu supports taking a more skeptical approach to the entry defense, for two reasons. First, successful entry often would make a merger unprofitable, so it may be appropriate to infer the presence of entry barriers or the absence of a viable entrant. Second, only rarely will a merger cause previously unprofitable entry to become profitable, a necessary condition for the entry defense.

Steven Salop
Link to Comment | Salop, A Suggested Revision of the 2020 Vertical Merger Guidelines
Salop recommends lowering the HHI level currently associated with the structural presumption. He outlines alternative anticompetitive presumptions for particular settings: these include elimination of potential entrants and foreclosure of the maverick seller or buyer. Although Salop does not advocate for integrating the HMGs and the VMGs, he emphasizes the importance of recognizing how both horizontal and vertical mergers may have coordinated and unilateral effects. Actively drawing from both sets of guidelines will enable the Agencies to litigate merger cases more effectively.

Martin Schmalz
Link to Comment

Thomas Wollmann
Link to Comment
In analyzing mergers which do not face the pre-merger notification requirement under the Hart-Scott-Rodino (HSR) Act, Wollman has found evidence of stealth consolidation—the merger of two firms whose transaction value falls just below the standard reporting threshold.. In order to address stealth consolidation of small firms, Wollmann advises that the HSR thresholds be lowered. In addition, Wollmann demands greater scrutiny of small mergers, especially those which involve geographic overlap or occur within industries of concern (e.g., dialysis clinics, funeral homes, supermarkets).

Zack Cooper, Zarek Brot-Goldberg & Sttuart Craig
Link to Comment |
Cooper et al., The Price Ain't Right? Hospital Prices and Health Spending of the Privately Insured
Cooper et al. draw attention to hospital mergers. Cooper’s research shows that hospital mergers which result in elevated healthcare costs tend to fall below the standard reporting threshold or are structured as “strategic affiliations.” As the consequences of lessened competition among hospitals are severe, Cooper advises that Agencies’ review all hospital mergers and strategic affiliations regardless of whether the transactions are above or below the HSR requirement.

Fiona Scott Morton
Link to Comment | Scott Morton, Antitrust Theories of Harm | Salop & Scott Morton, The 2010 HMGs Ten Years Later: Where Do We Go From Here? | Posner et al., A Proposal to Limit the Anticompetitive Power of Insitutrial InvestorsAthey & Scott Morton, Platform Annexation
Scott Morton suggests that integrating the HMGs and VMGs may benefit the Agencies in litigation by clarifying the relationship between the “horizontal” and “vertical” theories of harm. Regarding transactions that take place in digital markets, Scott Morton also recommends that the revised HMGs recognize the significance of interoperability to platform competition. In a joint paper published in 2021, she and Steven Salop propose several amendments to the HMGs which would address concerns about “false negatives” in antitrust enforcement, or the under-deterrence and insufficient interdiction of anticompetitive mergers.

Gregory Werden
Link to Comment

Marshall Steinbaum, Ioana Marinescu & José Azar
Link to Comment
Steinbaum, Marinescu, and Azar describe the recent empirical literature showing that wages fall due to increased concentration, including in cases where mergers reduce employment options for workers. The evidence supports the importance of competition in labor markets in achieving higher (competitive) wages for workers. The commenters urge the agencies to include a section on labor markets in the guidelines and explain in the guidelines how to enforce against mergers that harm workers.

Comments by Topic

The matrix below categorizes the curated comments listed above by topic area covered. Many, but not all, of these topic areas correspond to sections of the 2010 Horizontal Merger Guidelines. This is meant to help readers quickly identify the material relevant to each of these issues. Clicking a commenter’s name will take you back to our summary of their comment.

Topic Area Covered Comment 1 Comment 2 Comment 3 Comment 4 Comment 5 Comment 6 Comment 7 Comment 8
Market Definition Rose & Shapiro AAI Conlon Dafny & Rose Werden Asker et al.    
Structural Presumption / HHIs AAI Conlon Salop Schmalz Scott Morton Steinbaum et al. Werden Asker et al.
Acquisitions of Potential & Nascent Competitors Rose & Shapiro Ederer Wollmann Scott Morton Werden Asker et al.    
Innovation Competition Ederer Scott Morton Werden          
Unilateral Effects Salop Werden            
Coordinated Effects Salop Werden Asker et al.          
Labor Markets Rose & Shapiro AAI Steinbaum et al. Werden Asker et al.      
Serial Acquisitions AAI Dafny & Rose Werden          
Consummated Mergers AAI Ederer Werden          
Common and Partial Ownership AAI Conlon Schmalz Scott Morton Werden      
Entry Defense Miller Werden Asker et al.          
Efficiencies Defense AAI Steinbaum et al. Werden Asker et al.        
Remedies AAI Salop Steinbaum et al. Werden        
HSR Threshold & Reporting Ederer Wollmann Cooper et al.          
Digital Markets AAI Scott Morton Werden