Markets in Merger Analysis

Abstract

Antitrust merger policy suffers from a disconnect between its articulated concerns and the methodologies it employs. The Supreme Court has largely abandoned the field of horizontal merger analysis, leaving us with ancient decisions that have never been overruled but whose fundamental approach has been ignored or discredited. Only within the last generation has econometrics developed useful techniques for estimating the price impact of specific mergers in differentiated markets. Although the Supreme Court's Brown Shoe decision required a market definition, the Court was not thinking of a relevant market as a grouping of sales capable of being monopolized or cartelized. The perceived injury in Brown Shoe was not collusion, but rather that the postmerger firm would acquire a competitive advantage over its competitors. Indeed, Brown Shoe was a “unilateral effects” case in the sense that its concern was with the likelihood that the postmerger firm would be able to undersell other firms within the same market.