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71 Calif. L. Rev. 535 (1983)
The 1982 Department of Justice Merger Guidelines: An Economic Assessment

handle is hein.journals/calr71 and id is 547 raw text is: The 1982 Department of Justice Merger Guidelines: An Economic Assessment Janusz A. Ordovert Robert D. Willig$ Well before the new Merger Guidelines were issued in June 1982, it had become commonplace to criticize the reigning 1968 Guidelines as significantly out of touch with the new learning in industrial eco- nomics. In the intervening years, students of empirical industrial eco- nomics had argued that the market share increments that were likely to be challenged-for example, a horizontal merger of two firms each with a 5% market share-were not likely to enhance substantially the market power of the merger partners. Neither was the resulting in- crease in concentration likely to worsen market performance apprecia- bly. Other empirical arguments suggested that markets in which four firms held a 75% market share, highly concentrated markets in the language of the 1968 Guidelines, were not always susceptible to collu- sion and that the incumbent firms might be expected to behave as ri- vals, if not necessarily as competitors. Furthermore, theoretical work in industrial organization showed that vertical mergers were less likely to cause resource misallocation than was feared by the drafters of the 1968 Guidelines. In fact, a substantial consensus emerged that vertical mergers were as likely to promote efficient allocation of resources as not. The 1982 Merger Guidelines were expected to close the gap be- tween this new learning and the enforcement of the merger statutes. Not surprisingly, the new Guidelines: (1) increase the market share levels of the merging firms at which a merger will presumptively go unchallenged; (2) significantly raise the benchmark levels for classify- ing markets as concentrated and highly concentrated; and (3) markedly restrict the universe of vertical mergers that are likely to be challenged. Surprisingly, however, the Guidelines also provide a novel way of con- t Professor of Economics, New York University; Adjunct Professor of Law, Columbia University. * Professor of Economics and Public Affairs, Princeton University. We would like to thank Eleanor Fox for comments and efforts that were exceedingly helpful and well beyond the call of duty. She cannot be blamed, however, for the result. We would also like to thank the National Science Foundation for support.

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