Comments of the International Center for Law and Economics on the DOJ-FTC Request for Information on Merger Enforcement

Abstract

The Federal Trade Commission and U.S. Justice Department’s request for information on whether and how to update the antitrust agencies’ merger-enforcement guidelines is based on several faulty premises and appears to presuppose a preferred outcome: stronger (rather than optimal) merger enforcement. It also telegraphs an attempt by the agencies to pronounce as settled what are actually hotly disputed, sometimes stubbornly unresolved issues among experts.

As our comments explain, the RFI misconstrues the role of merger guidelines, which is to reflect the state of the art in a certain area of antitrust. Instead, the RFI seeks information to support a broad invigoration of merger enforcement, regardless of the extent of scholarly or jurisprudential consensus. This not only overreaches the FTC’s and DOJ’s powers, it also risks galvanizing opposition from the courts, thereby undermining the utility of adopting guidelines in the first place.

The RFI asks questions regarding a number of significant, substantive issues in merger enforcement. While it is certainly appropriate to ask such questions, it is also crucial to be appropriately circumspect about the answers and their implications. Yet, as we discuss in our comments, the assumptions that underly the agencies' questions, as well as the tenuous nature of knowledge and practice in several of the areas of obvious interest to the agencies, suggest that the resulting guidelines will be deeply problematic. Among the most important of these assumptions and issues are:

1. An uncritical acceptance of the contentious narrative that lax antitrust enforcement has caused increased concentration in U.S. markets, when empirical data demonstrates that concentration is decreasing in local markets and that increased national-level concentration has been caused by productivity advances;

2. An interpretation that existing merger-control tools, such as the Herfindahl-Hirschman Index (HHI), allow too many anticompetitive mergers to slip through the cracks, without grappling with the role that such tools play in the overall antitrust framework to reduce total error costs and the cost of administration;

3. An eagerness to welcome new guidelines for mergers that affect labor markets and “monopsony” markets more broadly, despite little scholarly analysis of the fundamental complexity involved in applying merger-control rules to monopsony markets, where output is the relevant consideration;

4. An unwarranted presumption of a negative relationship between market concentration and innovation, or between market concentration and investment, when the opposite is often true;

5. A tendency to blur the longstanding demarcation between vertical and horizontal mergers, in ways that are likely to have chilling effects on pro-competitive vertical mergers;

6. An inclination to treat firms’ possession of data as a special factor in merger rules, rather than as any other intangible asset; and

7. A premature desire to apply the notion of “attention markets” in a merger-control context, despite a lack of scholarship offering objective, let alone quantifiable, criteria to identify firms that are unique competitors for user attention.

Keywords: antitrust, mergers, ftc, doj, guidelines, vertical mergers, concentration, HHI, error costs, labor, monopsony, horizontal mergers, data, attention markets

JEL Classification: K21, J21, J38, L13, L41, L42