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36 Antitrust 4 (2021-2022)
What next for the Horizontal Merger Guidelines?

handle is hein.journals/antitruma36 and id is 92 raw text is: C O V E R S T O R I E S What Next for the Horizontal Merger Guidelines? NANCY L. ROSE AND CARL SHAPIRO N 9 JULY 2021, PRESIDENT BIDEN issued an executive order that included the following statement: To address the consolidation of industry in many markets across the economy, as described in section 1 of this order, the Attorney General and the Chair of the FTC are encouraged to review the hor- izontal and vertical merger guidelines and consider whether to revise those guidelines.' On January 18, 2022, the Department of Justice and the Federal Trade Commission launched a joint public inquiry aimed at strengthening enforcement against illegal mergers and issued a detailed Request for Information on Merger Enforcement (RFI).2 This article offers recommendations on how best to update the current Horizontal Merger Guidelines (HMGs), which were issued in 2010 by the DOJ and the FTC (the Agencies).' Why Revise the Horizontal Merger Guidelines Now? The impetus to update the HMGs seems primarily to be based on the view that competition has declined in recent years in the American economy. President Biden's executive order states that over the last several decades, as industries have consolidated, competition has weakened in too many markets, denying Americans the benefits of an open economy and widening racial, income, and wealth inequality. These concerns apply to labor markets, not just product markets. According to the executive order, it is the policy of the Biden Nancy L. Rose is the Charles P. Kindleberger Professor of Applied Eco- nomics at the Massachusetts Institute of Technology and Matina S. Horner Distinguished Visiting Professor at Harvard's Radcliffe Institute for Advanced Study, which she thanks for fellowship support. Carl Shap- iro is a Distinguished Professor of the Graduate School at the University of California at Berkeley. During 2009-2010, Shapiro led the working group at the DOJ charged with updating the Horizontal Merger Guide- lines. We thank Bill Baer, Jonathan Baker, Joe Farrell, Dave Gelfand, Scott Hemphill, Herb Hovenkamp, Joe Matelis, Jon Sallet, Steve Salop, and Fiona Scott Morton for valuable comments on an earlier draft. Our opinions are our own. No one has funded this article. Administration to enforce the antitrust laws especially in labor markets along with certain specified product markets. We have reviewed the evidence about trends in competi- tion in the American economy very closely.4 As we read the primary research results, the overall evidence from merger ret- rospectives supports the conclusion that many consummated mergers have lessened competition,' including mergers that escaped Hart-Scott-Rodino review.' Few mergers are inves- tigated, still fewer challenged,7 and litigated challenges are focused on mergers with enormous increases in concentration in markets already dominated by no more than a few firms.' While such anticompetitive mergers should be blocked, these patterns suggest that mergers in many highly concentrated markets were allowed to move forward.9 At the same time, some research suggests that much of the growing share of U.S. economic activity accounted for by large businesses may result from highly efficient superstar firms growing at the expense of other, perhaps less-efficient, firms, a compet- itive outcome that can improve welfare.10 That competitive process has been fueled by massive advances in information technology, the growing importance of intangible assets, and globalization. Consistent with this, increases in concentra- tion at the national sector level were in many cases associated with decreases in concentration in more local geographies and at the level of relevant antitrust product markets.' We believe the empirical evidence strongly supports a tightening of overall merger enforcement. The observed trends in concentration, price/cost margins, and profits are no doubt the result of underenforcement against mergers in some markets, and pro-competitive growth by large efficient firms in others. But even in markets where current high lev- els of concentration reflect past growth by more efficient firms that are successfully harnessing economies of scale and scope, close scrutiny of acquisitions is needed to pre- vent market leaders from acquiring actual or potential rivals whose growth might otherwise put competitive pressure on incumbents. The Biden Administration's call to strengthen merger enforcement, in part by updating the HMGs, can serve this goal, as did the 2010 revisions. Our recommen- dations take as given that the updated HMGs should and will articulate a more assertive merger enforcement policy.' 4 - A N T I T R U S

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