Horizontal Merger Analysis

Harvard Law School John M. Olin Center Discussion Paper No. 1049 (2020)

29 Pages Posted: 7 Feb 2021

See all articles by Louis Kaplow

Louis Kaplow

Harvard Law School; National Bureau of Economic Research (NBER)

Date Written: December 3, 2020

Abstract

Economic analysis of competition regulation is most developed in the domain of horizontal mergers, and modern agency guidelines reflect a substantial consensus on the appropriate template for merger assessment. Nevertheless, official protocols are understood to rest on a problematic market definition exercise, to use HHIs and ΔHHIs in ways that conflict with standard models, and more broadly to diverge with how economic analysis of proposed mergers should be and often is conducted. These gaps, unfortunately, are more consequential than is generally appreciated. Moreover, additional unrecognized errors and omissions are at least as important: analysis of efficiencies, which are thought to justify a permissive approach, fails to draw on the most relevant fields of economics; entry is often a misanalyzed afterthought; official information collection and decision protocols violate basic tenets of decision analysis; and single-sector, partial equilibrium analysis is employed despite the presence of substantial distortions (many due to imperfect competition) in many sectors of the economy. This article elaborates these deficiencies, offers preliminary analysis of how they can best be addressed, and identifies priorities for further research.

Keywords: Mergers, competition policy, antitrust, market definition, efficiencies, entry, unilateral effects, coordinated effects, general equilibrium

JEL Classification: D43, K21, L13, L41

Suggested Citation

Kaplow, Louis, Horizontal Merger Analysis (December 3, 2020). Harvard Law School John M. Olin Center Discussion Paper No. 1049 (2020), Available at SSRN: https://ssrn.com/abstract=3741660 or http://dx.doi.org/10.2139/ssrn.3741660

Louis Kaplow (Contact Author)

Harvard Law School ( email )

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