I think this discussion is very provoking and interesting. It does fuel a spark of concern, though, regarding how developing countries, that look up to the merger guidelines and to the FTC, may come to understand the proposed changes. It may seem irrelvant from a US perspective, but the FTC has important international influence, and the decisions it takes may bring upon a cascade of regulatory changes that may not be benign. For example, raising the HHI threshold may send a wrong message, that is, that market concentrations are less harmful that what was originally considered. (I understand that this is more a rule of thumb than an expert advise). In developing countries, however, raising the thresshold usually allows entrenching barriers of entry, deeper concentration of markets and the eventual perpetuation of crony capitalism. It allows precisely the wrong kind of market structures, those which hinder development and welfare.

So, should the FTC manage a double – standard regarding the antitrust policy that is being exported? Or should it maintain its previous, well established message to mantain its credibility? Any comments welcome.

One possibility (not discussed by Sidak and Teece) is to look at the internal rate of return (IRR) to cash flow invested in particular product lines or services over a given window of time. There is a distribution of outcomes, which may not be normal because of network effects, but which would represent the outcome of healthy substitution into new products or services and away from older ones, up to some threshold. Beyond that threshold, the growth in market share represented by a very high IRR is almost certainly due to bribery, extortion, pyramid schemes, and other forms of fraud or deceit.

Since we’re having an academic discussion here, let’s consider some really radical ideas — why not scrap HHI analysis along with market definitions — isn’t the need to put numbers on things with HHI the reason we bother with market definitions anyway?

HHI is an archaic metric for understanding the dynamcis of competition in today’s markets. Market share evolves far too rapidly and along too many dimensions for HHI to make any sense as a quantitative measure of anticompetitive prospects.