Mergers and Acquisitions

In the vast majority of antitrust challenges to mergers and acquisitions, the matters have been resolved by consent order or decree. The Department of Justice and the FTC have sought to clarify they way they analyze mergers through merger guidelines issued May 5, 1992 (4 Trade Reg. Rep. [CCH] ¶ 13,104). These guidelines are not "law" but enforcement-policy statements. Nevertheless, the antitrust enforcement agencies will use them to analyze proposed transactions.

The 1992 merger guidelines state that most horizontal mergers and acquisitions aid competition and that they are beneficial to consumers. The intent of issuing the guidelines is to "avoid unnecessary interference with the larger universe of mergers that are either competitively beneficial or neutral."

The guidelines prescribe five questions for identifying hazards in proposed horizontal mergers: Does the merger cause a significant increase in concentration and produce a concentrated market? Does the merger appear likely to cause adverse competitive effects? Would entry sufficient to frustrate anticompetitive conduct be timely and likely to occur? Will the merger generate efficiencies that the parties could not reasonably achieve through other means? Is either party likely to fail, and will its assets leave the market if the merger does not occur?

The guidelines essentially ask which products or firms are now available to buyers, and where could buyers turn for supplies if relative prices increased by five percent (the measure for assessing a merger-generated price increase). The guidelines redraw market boundaries to cover more products and a greater area, which tends to yield lower concentration increases than U.S. Supreme Court merger decisions of the 1960s.