1992 Merger Guidelines to be Revised (and Market Definition Here to Stay)
Today at the Georgetown Law Global Antitrust Enforcement Symposium, the Chair of the Federal Trade Commission, Jon Leibowitz, announced that DOJ’s Antitrust Division and the FTC will undertake a revision of the 1992 Merger Guidelines. A series of workshops is scheduled to determine whether the Guidelines need revision, and what the revisions should be. The joint press release is here and here. Leibowitz, in his remarks introducing Philip Low of the EU Commission’s DG Comp, listed who at DOJ and FTC will spearhead the initiative:
From the FTC side we have Rich Feinstein, Director of the Bureau of Competition, Joe Farrell, Director of the Bureau of Economics, and Howard Shelanski, Deputy Director for Antitrust in the Bureau of Economics. … From the Antitrust Division we have Deputy Assistant Attorneys General Molly Boast, Carl Shapiro, and Phil Weiser.
Also at the Symposium, AAG Christine Varney delivered remarks during lunch. She said that efforts will be focused on three areas: market definition (including, for example, the issue whether the Guidelines need to be revised to make clear that the location of customers is the relevant consideration for determining geographic market), market concentration, and competitive effect. On market concentration, Varney pointed out that the disparity between the Guidelines’ HHI thresholds and agency practice leads to confusion, a lack of predictability, and vitiates the agencies broader goal of transparency. (Varney’s speech at the International Bar Association’s meeting on transparency and procedural fairness is here.) Varney also said that, unless the workshops and public comments tell the agencies otherwise, the plan is to leave the basic structure of the Guidelines in place, for instance the hypothetical-monopolist test or the three-part test for market entry. The text of the Varney’s speech has already been posted on the DOJ webpage.
In response to a question by Jim Rill (under whose leadership the 1992 Guidelines were issued), Varney said that “market definition is here to stay.” The question is pertinent since both Carl Shapiro and Joseph Farrell appeared as panelists at the Symposium. Shapiro in particular spoke to the “upward price pressure” test he and Farrel have developed to permit a direct inquiry into competitive effects without (upfront) market definition in unilateral effects cases in differentiated products markets. Bob Willig, always a treat to listen to at events, described UPP as a “beautiful idea” that may be the next big thing, and even suggested considering it in coordinated effects cases (which surprised me). He also voiced the concern that if UPP were to be used by the agencies to assess mergers, the parties would need to be prepared to conduct analyses early on, such as diversion analysis, natural experiments, and economic regressions, before a Second Request would issue. But given Varney’s comment and the fact that the FTC got chided by Judge Brown in Whole Foods for not treating market definition as the central and foremost issue (when the FTC finally made unilateral effects arguments on appeal), I doubt UPP will be more than a wrinkle in merger analysis even during Shapiro’s tenure at the DOJ.
But there is definitely movement. The question of the market definition’s centrality also came up in Varney’s remarks on the upcoming Guidelines workshops. Varney said that three areas of competitive effects would be of particular interest: unilateral effects in differentiated-products markets (not surprising, since unilateral effects are given a bare-bones treatment in the Guidelines), price discrimination to vulnerable customers, and finally “more direct types of evidence” to consider. On the last point, Varney said:
Third, we are interested in your views on the use of more direct evidence that is not strictly based on inferences drawn from increases in market concentration. There are several categories of such evidence worth exploring: (1) evidence of the actual, post-merger competitive effects of consummated mergers, (2) evidence of “natural experiments” obtained by looking across different geographic markets, time periods, customer categories, or similar product markets; (3) evidence of the firms’ post-merger plans; (4) evidence of customer views of post-merger competition; (5) historical evidence of actual head-to-head competition between the merging firms; and (6) historical evidence of actual or attempted coordination in the industry. Although the Agencies routinely rely heavily on these kinds of evidence to assess competitive effects, the Guidelines address their relevance only in passing and only secondarily, after the relevant market is defined and concentration in that market is measured. Courts also regularly rely on this type of evidence in assessing competitive effects. We are interested in views on whether we should adjust the Guidelines to address explicitly what kinds of direct evidence are pertinent and how they should be weighed.
Notice that UPP is absent from the list.
RSS Feed
January 27th, 2010 at 3:38 am
[...] recently in the Farrel & Shapiro article (pdf). Interestingly, while Varney is previously on record opposing this movement, elsewhere in this speech she seems to endorse it: There is a growing body [...]