BPEA | 1991: Microeconomics

Merger Analysis, Industrial Organization Theory, and Merger Guidelines

Microeconomics 1991

THE LEADERSHIP of the Antitrust Division of the U.S. Department of Justice has, over the past two years, emphasized that the department’s 1984 merger guidelines are a sound prescription for horizontal merger enforcement, that as a matter of policy they are being applied in enforcement decisionmaking, and that there may be a need for “clarification and fine-tuning” of the guidelines. This paper examines some facets of the antitrust analysis of horizontal mergers in the light shed by industrial organization (10) theory, in order to stimulate discussion of some possible directions for fine-tuning and clarification of the guidelines. I focus on the possible anticompetitive effects of horizontal mergers and the role of potential entry in merger analysis. However, to set the context for these subjects, it will be helpful first to sketch the nature of the merger guidelines.