United States v. H&R Block: Market Definition in Court since the 2010 Merger Guidelines

Abstract

United States v. H&R Block has been viewed as a contest between old and new approaches to merger analysis: a structural approach centering on market definition versus an effects analysis involving merger simulation. The economists on the DOJ team, however, saw the two approaches as nonconflicting and complementary. We focus here on two issues in market definition that were disputed at trial: first, in what order should products be added to the provisional market; and second, when should that process stop. With respect to the ranking of “close substitutes,” we suggest “normalizing” diversion ratios to account for shares or output, and perhaps also for margins. With respect to the latter, we show that merger simulation can be used to estimate not only the price effect from this merger, but also the price effect for a merger to monopoly in the proposed market and thus provide a rigorous implementation of the SSNIP test.