Modernizing the Vertical Merger Guidelines

By Steven C. Salop

In this short article, I highlight some key issues in formulating revised guidelines and legal standards for vertical mergers that several co-authors and I have analyzed in recent articles. These are distilled into five principles. These principles flow from a recognition that the harms and benefits from horizontal and vertical mergers in oligopoly markets are similar, that cognizable vertical merger efficiencies are not inevitable, and that the Section 7 incipiency standard places weight on false negatives. Agencies should evaluate vertical merger efficiency claims as critically as they do for horizontal mergers and should require the merging parties to show that any efficiencies (including EDM) are verifiable, merger-specific and sufficient to reverse the potential anticompetitive effects. The agencies should limit safe harbors and consider a number of anticompetitive presumptions.