‘Tally-Ho!’: UPP and the 2010 Horizontal Merger Guidelines
64 Pages Posted: 15 Sep 2011 Last revised: 21 Sep 2011
Date Written: September 14, 2011
The 2010 Horizontal Merger Guidelines and their incorporation of upward pricing pressure (“UPP”), as discussed in Carl Shapiro’s article, The 2010 Horizontal Merger Guidelines: From Hedgehog to Fox in Forty Years, leave unanswered questions regarding whether the Guidelines are consistent with the Clayton Act – and whether a UPP screen provides a reliable basis in law or economics for identifying horizontal mergers that may raise competitive concern. The Guidelines’ departure from market definition and reasonable interchangeability in favor of consumer preferences is inconsistent with the Clayton Act and prevailing case law, including Brown Shoe and Oracle. Because of UPP’s absence of demonstrated reliability in predicting real-world competitive effects, it is premature to embrace UPP as a merger review tool for use by the FTC or the DOJ. Moreover, the Guidelines’ apparent willingness to embrace a UPP screen without providing clear consideration of how an inevitably positive UPP for merging competitors will be weighed against dynamic supply responses or efficiencies is cause for concern. Eliminating this potential counterweight to the UPP screen invites the serious potential in practice for the Agencies to adopt a “heads I win, tails you lose” application of the revised Guidelines.
Keywords: Merger Guidelines, HMG, UPP, Upward Pricing Pressure, Market Definition, HMT, Hypothetical Monopolist Test, Critical Loss
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