Monday, January 4, 2010
Revising the Merger Guidelines: Second Request Screens and the Agencies' Empirical Approach to Competitive Effects
Posted by D. Daniel Sokol
Gregory Leonard (NERA Economic Consulting) & Lawrence Wu (NERA Economic Consulting) advocate Revising the Merger Guidelines: Second Request Screens and the Agencies' Empirical Approach to Competitive Effects.
ABSTRACT: Two aspects of the Merger Guidelines could benefit from a revision.
First, the Merger Guidelines do not provide guidance on how the Agencies determine whether or not they will issue a Request for Additional Information and Documentary Material (i.e., a “Second Request”). Yet, for many merging parties, guidance on how the Agencies make this initial decision is critical because the receipt of a Second Request implies substantial costs, a lengthier investigation, and delays that could jeopardize the financing of the transaction itself. Thus, a revision that gives greater clarity on the types of evidence and screens that are used in this stage of the investigation will help merging parties and their counsel make more informed decisions as they contemplate the antitrust risk associated with a particular transaction.
Second, the Merger Guidelines offer little guidance regarding the types of empirical evidence and analyses that the Agencies rely upon to determine the likely competitive effects of a proposed transaction. Yet Second Requests typically ask for substantial amounts of data, and, in our experience, the Agencies routinely seek to use these data to implement analyses designed to shed light on the competitive effects of the proposed transaction. Thus, a revision to the Merger Guidelines that provides guidance on the types of empirical analyses that may be undertaken by the Agencies will help the merging parties and the antitrust bar appreciate (a) why the Agencies ask for substantial amounts of data in the Second Request and (b) the variety of empirical questions that the Agencies may ask when evaluating the competitive impact of a proposed transaction.
The nature of the revisions that we are proposing derives from our view that the Merger Guidelines would be more informative and useful if they reflected the actual practices of the Agencies.