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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?

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
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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