What Next for the Horizontal Merger Guidelines?

By Nancy L. Rose (Massachusetts Institute of Technology) & Carl Shapiro (University of California)

We offer recommendations for how the Department of Justice and the Federal Trade Commission can update the Horizontal Merger Guidelines (“HMGs”) to strengthen merger enforcement. We focus our recommendations on three main areas. First, we suggest several ways that the HMGs can strengthen the structural presumption in a manner consistent with sound economics and with how the courts have been analyzing mergers in recent decades. Most important, the HMGs can do more to explain how and why the Hypothetical Monopolist Test (“HMT”), embraced by the courts for decades as a method to define relevant markets, often leads to narrow markets. They also can add presumptions based solely on increase in concentration caused by the merger, to address unilateral harms that currently may escape redress. Second, we recommend that the HMGs elaborate on how the Agencies determine whether a merger may substantially lessen dynamic competition, which includes potential competition and innovation. The historical emphasis of merger law on static market structure has made it unduly difficult for the government to challenge mergers that may lessen dynamic competition. Updated HMGs can help fix this historical oversight. Third, merger enforcement has not paid enough attention to how mergers may lessen competition among employers to hire workers. We suggest that the updated HMGs include a new section, Mergers of Competing Employers, to explain how the Agencies assess such harms to workers.

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