The U.S. Federal Trade Commission released new data on its
horizontal merger investigations from the past four years,
providing deeper insight into the types of mergers between
competitors that are likely to draw antitrust scrutiny. The
new report depicts, industry-by-industry, the
levels of market concentration for proposed mergers that have
triggered an FTC investigation or enforcement action, illuminating
how the FTC may apply greater scrutiny to mergers in certain
industries, such as oil.
The new report (which updates a 2008 version) shows that, from
1996 to 2011, the FTC issued a second request and investigated 264
mergers, where the staff principally focused on a horizontal theory
of anticompetitive harm. For those 264 investigations, which
involved 1372 separate markets, the report provides data on market
concentration, the number of significant competitors, the existence
of hot documents, the existence of customer complaints, and ease of
entry.
Two points stand out:
FTC challenged the mergers that most increased market
concentration. The data confirm that most FTC
investigations and enforcement actions involved mergers with market
concentration levels exceeding the highest threshold set forth in
the Horizontal Merger Guidelines (2010). The Guidelines state
that mergers that create "highly concentrated markets"
– markets with a "Herfindahl-Hirschman Index" (HHI)
of 2500 or more – and that involve an increase in HHI of more
than 200 points "will be presumed to be likely to enhance
market power." The new report shows that the
overwhelming majority of FTC mergers reviewed exceed these
criterion, with the exception of mergers in the oil industry.
Similarly, the FTC's subsequent decision to bring enforcement
actions correlate with the post-merger HHIs of the markets
involved. In markets with post-merger HHIs between 2400 and
3999, the FTC sought enforcement in 72 percent of cases reviewed;
and, in markets with post-merger HHIs of 4000 or greater, the FTC
sought enforcement in 93 percent of cases it reviewed.
Some industries get more action than
others. The report highlights the fact that the FTC
has treated some industries differently. In FTC
investigations of proposed mergers in the oil industry, 71 percent
of the markets involved had post-merger HHIs of less than
2400. By contrast, in FTC investigations of proposed mergers
in other industries, the post-merger HHIs were rarely below 2400
(e.g., 11 percent for grocery markets, 10 percent for branded
consumer goods markets, and 2 percent for pharmaceutical
markets).
Such different treatment across industries is even more visible
with respect to enforcement decisions. For instance, after
investigating proposed mergers in pharmaceuticals, the FTC sought
enforcement in 119 out of 122 markets; and, after investigating
proposed mergers in chemicals, the FTC sought enforcement in 90 out
of 103 markets. By contrast, after investigating proposed
mergers, the FTC only sought enforcement in 8 out of 20 hospital
markets, 15 out of 26 electronically-controlled devices and systems
markets, and 21 out of 40 branded consumer goods markets.
Of course each merger is unique, and the data further show how the
existence of hot documents, credible customer complaints, or easy
entry conditions can affect enforcement decisions. However,
the data shown in this report highlight trends that are useful for
businesses in analyzing the potential enforcement challenges
presented by a merger between competing companies.
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