Friday, November 19, 2010
Posted by D. Daniel Sokol
Gregory Leonard (NERA) asks The 2010 Merger Guidelines: Do We Need Them? Are They All We Need?
ABSTRACT: The release of the 2010 Merger Guidelines was largely an anticlimax. Unlike the 1982 and 1992 Merger Guidelines, the 2010 Merger Guidelines did not offer any radical changes in Agency policy or introduce any innovative principles or modes of analysis. Instead, the 2010 Merger Guidelines can best be characterized as reflecting existing Agency practices. To be sure, those practices have evolved over the last 18 years and, consequently, the 2010 Merger Guidelines differ from the 1992 Merger Guidelines in important respects. For example, the 2010 Merger Guidelines' focus on diversion ratios and margins reflects economic thinking about unilateral effects developed since the 1992 Merger Guidelines were issued. However, that the Agencies analyze diversion ratios and margins in merger review should not be news to any experienced antitrust practitioner.
Some commentators view the downplaying of market definition in the 2010 Merger Guidelines as a major development. However, this also should not have come as a shock to anyone. For years, many economists, including chief Agency economists Carl Shapiro and Joe Farrell, have stressed the supremacy of direct evidence of competitive effects over market definition when such direct evidence is available. Moreover, in Whole Foods, the Federal Trade Commission ("FTC") explicitly adopted this position.
Some commentators argue that a significant change in the 2010 Merger Guidelines as compared to the 1992 Merger Guidelines is a greater ambiguity as to the specific approach the Agencies will take in a given case, which creates uncertainty for the business community. This characterization of the difference between the 1992 and 2010 Merger Guidelines is accurate. However, it was well-known that the Agencies typically did not follow the script of the 1992 Merger Guidelines-look no further than the HHI thresholds, which were largely ignored. Again, the 2010 Merger Guidelines give a more accurate picture of actual Agency practice, which is not to follow any particular mode of analysis, but instead to focus on the mode that is most relevant given the data available and the nature of the industry.