Fair Trade or Imperialism: Importing 'Merger Guidelines' into (De)Regulatory Policy

Abstract

Since initially presented in the 1982 Department of Justice Horizontal Merger Guidelines, market definition has been adopted nearly worldwide to see if a merger would substantially lessen competition. This framework is also useful for addressing the similarly counterfactual question of whether forbearance from regulation would lead to an increase in prices. Because the alternative to forbearance is regulation, and since some regulated rates may be below competitive levels, finding that deregulation would lead to market power as defined for mergers need not deter deregulation. Forbearance in telecommunications highlights market definition questions regarding gross vs. marginal substitutes, dynamic efficiencies, and service bundling. It also reveals ambiguities in the meaning of "geographic market." Market definition may have limits if regulation exists not to prevent high prices, but the abuse of dominance through predatory pricing.

Keywords: Deregulation, merger guidelines, telecommunications, forbearance, privatization

JEL Classification: L51, K23, L96