Wednesday, December 30, 2009

On Revising the Horizontal Merger Guidelines

Posted by D. Daniel Sokol

Luke Froeb (Vanderbilt University) has a comment On Revising the Horizontal Merger Guidelines.

ABSTRACT: To determine whether a proposed merger is anticompetitive, one must compare the world without the merger—which is observed—to the world with the merger, which typically is not. Viewed in this way, the primary problem confronting antitrust enforcers is how to draw inference about the unobserved state of the world. The same problem characterizes monopolization or abuse-of-dominance cases, except that the world with the alleged abuse is observed, while the world without the abuse typically is not.

Enforcement Guidelines can facilitate inference by institutionalizing the language and analytic framework used by enforcers, but they must also be flexible enough to accommodate the many different ways in which firms compete. In this essay, I warn against one change, and advocate for another. Both the warning and the change are done with an eye towards facilitating inference about the competitive effects of mergers.

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