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Margin of Error: The Flawed Paradigm in the New Merger Guidelines

Michael Baumann, Paul Godek, Mar 14, 2011

The U.S. Department of Justice ("DOJ") and the Federal Trade Commission ("FTC"), the two federal agencies that review mergers, recently issued new Horizontal Merger Guidelines, ("Guidelines"). The Guidelines, first issued in 1984 and revised in 1992 and 1997, comprise a formal statement of the agencies' approach to merger analysis, an approach that has generally reflected the economic concepts of markets and market power. The effort to explain merger policy, and to have that policy reflect economic principles, is laudable regardless of what one thinks of the final product. But the new version of the Guidelines offers a distinct break from the past and a new paradigm for merger analysis. The analytical core of the new Guidelines, however, relies on an assumption that was long ago shown to be invalid. Here we revisit that history and demonstrate that the paradigm in the new Guidelines is not consistent with basic economic principles.

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  • this is great

    Posted by Sue Roberts, 21/03/2011 3:12pm (3 years ago)

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