Five Principles for Vertical Merger Enforcement Policy

Georgetown Law Faculty Publications and Other Works. 2148 (2019)

20 Pages Posted: 7 May 2019

See all articles by Jonathan B. Baker

Jonathan B. Baker

American University - Washington College of Law

Nancy L. Rose

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Steven C. Salop

Georgetown University Law Center

Fiona M. Scott Morton

Yale School of Management; National Bureau of Economic Research (NBER)

Date Written: March 23, 2019

Abstract

There seems to be consensus that the Department of Justice’s 1984 Vertical Merger Guidelines do not reflect either modern theoretical and empirical economic analysis or current agency enforcement policy. Yet widely divergent views of preferred enforcement policies have been expressed among agency enforcers and commentators. Based on our review of the relevant economic literature and our experience analyzing vertical mergers, we recommend that the enforcement agencies adopt five principles: (i) The agencies should consider and investigate the full range of potential anticompetitive harms when evaluating vertical mergers; (ii) The agencies should decline to presume that vertical mergers benefit competition on balance in the oligopoly markets that typically prompt agency review, nor set a higher evidentiary standard based on such a presumption; (iii) The agencies should evaluate claimed efficiencies resulting from vertical mergers as carefully and critically as they evaluate claimed efficiencies resulting from horizontal mergers, and require the merging parties to show that the efficiencies are verifiable, merger-specific and sufficient to reverse the potential anticompetitive effects; (iv) The agencies should decline to adopt a safe harbor for vertical mergers, even if rebuttable, except perhaps when both firms compete in unconcentrated markets; (v) The agencies should consider adopting rebuttable anticompetitive presumptions that a vertical merger harms competition when certain factual predicates are satisfied. We do not intend these presumptions to describe all the ways by which vertical mergers can harm competition, so the agencies should continue to investigate vertical mergers that raise concerns about input and customer foreclosure, loss of a disruptive or maverick firm, evasion of rate regulation or other threats to competition, even if the specific factual predicates of the presumptions are not satisfied.

Keywords: vertical merger, antitrust, antitrust law, competition, antitrust enforcement

Suggested Citation

Baker, Jonathan B. and Rose, Nancy L. and Salop, Steven C. and Scott Morton, Fiona M., Five Principles for Vertical Merger Enforcement Policy (March 23, 2019). Georgetown Law Faculty Publications and Other Works. 2148 (2019). Available at SSRN: https://ssrn.com/abstract=3351391 or http://dx.doi.org/10.2139/ssrn.3351391

Jonathan B. Baker

American University - Washington College of Law ( email )

4300 Nebraska Avenue, NW
Washington, DC 20016
United States
202-274-4315 (Phone)

Nancy L. Rose

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-318A
Cambridge, MA 02142
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Steven C. Salop (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States
202-662-9095 (Phone)
202-662-9497 (Fax)

Fiona M. Scott Morton

Yale School of Management ( email )

New Haven, CT 06520
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
85
rank
297,754
Abstract Views
332
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information