RESTORING PREDICTABILITY TO MERGER GUIDELINE ANALYSIS

Thomas M. Jorde

Contemporary Economic Policy, 1986, vol. 4, issue 3, 1-21

Abstract: Two recent developments reduce predictability and accountability in merger analysis. First, the 1984 Merger Guidelines adopt a multifactor method of analysis that focuses upon market structure, other market factors, financial trends, and efficiencies. Little guidance is given concerning the relative importance of these factors or how they will be measured and balanced. Second, current enforcement agencies appear to take a “regulatory” approach to merger enforcement. They issue “no‐action” decisions in 90–95 percent of the mergers reviewed and reach “fix‐it‐first” consent settlements before complaints are filed in most remaining cases. These developments provide mixed blessings. Enforcement agencies gain flexibility and discretion. However, the business community suffers a reduction in predictability in merger analysis, which makes planning more difficult. Congress loses ability to carry out its oversight responsibilities, and the public's understanding of the government's policies is impaired. Systematic, regular reports of information used by the government analyzing significant “second‐request” mergers should replace the present system of providing either no information or, at best, only selected information through ad hoc press releases and official speeches. Reporting on these transactions would not be burdensome, because their number is relatively small and the information already has been produced by the investigating enforcement agency. This information could easily be incorporated into the annual Hart‐Scott‐Rodino Act reports. For each of these mergers, the information reported should include the government's views concerning the relevant market and the degree of concentration in that market. It also should specify the type and magnitude of other market factors, efficiencies, and/or defenses that might have played a role in reaching a decision not to prosecute the merger or a fix‐it‐first settlement. This information could be provided without infringing on confidentiality.

Date: 1986
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