On Aug. 19, 2010, the Department of Justice (DOJ) and Federal
Trade Commission (FTC) released the final version of the 2010
Horizontal Merger Guidelines. These revisions, marking the first
major overhaul to the 1992 Horizontal Merger Guidelines, reflect
the DOJ and FTC's shift toward a more fact-specific horizontal
merger analysis and de-emphasize the importance of defining a
relevant market. These new guidelines are intended to shine more
light on how these antitrust agencies will decide whether or not to
challenge a merger or acquisition between competitors.
The 2010 Guidelines "better reflect" the agencies'
current horizontal merger evaluation practices, according to
Christine Varney, Assistant Attorney General in charge of the
DOJ's Antitrust Division. Most significantly, the 2010
Guidelines reduce the agencies' focus on defining the relevant
market and instead focus on a "fact-specific process"
applying a "range of analytical tools" to the available
evidence. Under the 2010 Guidelines, an analysis of the competitive
effects of a merger does not necessarily begin with a definition of
the relevant market. The relevant market is "useful to the
extent" it highlights the merger's competitive effects,
but "is not an end in and of itself." The 2010 Guidelines
enumerate categories of relevant and reliable evidence and the
sources of such evidence bearing on the competitive effects of the
merger. Of particular relevance to the agencies is evidence the
merging firms created in the normal course of business and not
prepared as advocacy pieces.
Importantly, the 2010 Guidelines upwardly revise the agencies'
Herfindahl-Hirschman Index (HHI) thresholds, which provide the
agencies with a measure of the relevant market's concentration.
The 1992 Guidelines deemed a market with a HHI of less 1,000
"un-concentrated;" a market with a HHI between 1,000 and
1,800 as "moderately concentrated;" and a market with a
HHI over 1,800 as "highly concentrated." Under the 2010
Guidelines, a market with a HHI of less than 1,500 is deemed
"un-concentrated;" a market with an HHI between 1,500 and
2,500 is "moderately concentrated;" while a market with
an HHI above 2,500 is "highly concentrated." By
increasing the HHI threshold for un-concentrated markets, and
decreasing the size of "highly concentrated" markets, the
agencies may now devote less scrutiny to certain business
combinations that previously would have received more significant
regulatory review.
The 2010 Guidelines expand upon the hypothetical monopolist test
and its application in evaluating horizontal mergers. The test
assumes that a profit-maximizing business with a monopoly over a
product would impose a "small but significant and
non-transitory increase in price" (SSNIP) on one or more
products in the relevant market. The Guidelines discuss a multitude
of factors evaluated by the agencies when calculating a SSNIP
value, but do not establish a SSNIP tolerance level. The
hypothetical monopolist test will be used "to the extent
possible given the available evidence."
The 2010 Guidelines simplify the agencies' evaluation of
barriers to entry for the relevant market. If the barriers to entry
are low and other firms are able to undertake an expansion, then
any anti-competitive effects a merger are significantly reduced. In
addition, the 2010 Guidelines formally address the agencies'
evaluation of mergers between competing buyers and the
corresponding increase in buying power.
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