Do the 2010 Horizontal Merger Guidelines require market definition? Will the agencies define markets in cases they bring? Are they required to do so by the Guidelines? By the Clayton Act?
Here is Commissioner Rosch in the FTC Annual Report (p.18):
“A significant development in 2010 was the issuance of updated Horizontal Merger Guidelines by the federal antitrust agencies. The 2010 Guidelines advance merger analysis by eliminating the need to define a relevant market and determine industry concentration at the outset.”
Compare with Commissioner Rosch’s reported remarks at the Spring Meeting:
“I want to emphasise: I don’t care what the 2010 guidelines say, you can never do away with market definition,” Rosch said.
Does the latter statement assert that the HMGs do not require market definition at all? If so, the statement in the former that the agencies don’t need to do it first certainly follows. And why is it an “advance” to eliminate the need to define a market first but seems to be a bad thing to eliminate it altogether in certain cases? Of course, as DOJ (and, importantly, UCLA Bruin) economist Ken Heyer points on in his remarks at the same Spring Meeting event, and I’ve written about here and here, most expect the agencies to continue defining markets because federal courts expect it, may require it, and failure to do so will harm the agencies’ ability to successfully bring enforcement actions. Nonetheless, the statements do not provide much clarity on the Commissioner’s (or, for that matter, Commission’s) views with respect to the new HMGs and the role of market definition.
Over at the DOJ, on the other hand, former Chief Economist Carl Shapiro — congratulations to the newly appointed Fiona Scott Morton — made clear that agencies’ stance on the role of market definition:
“The Division recognizes the necessity of defining a relevant market as part of any merger challenge we bring.”
No such announcement from the FTC. And Commissioner Rosch’s remarks do not clarify matters. On the one hand they seem to indicate the FTC will always define markets; on the other, they imply that they do so despite the fact that the Guidelines say they don’t have to. With Shapiro gone, the DOJ view is unclear at the moment. Perhaps all of this is much ado about nothing as a practical matter — though I’m not sure of that. But if the Agencies both consider market definition a “necessity,” why not just say so? Why not write: “market definition is required by Section 7 of the Clayton Act and the agencies will, at some point in the analysis, define a relevant market”?
Market definition requirement aside, my views on the positive developments in the new Merger Guidelines and the larger problem they present — asymmetrically updating theories of competitive harm without doing so on the efficiencies side — articulated in this forthcoming paper.