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Kwoka, John --- "Mergers that Eliminate Potential Competition" [2012] ELECD 217; in Elhauge, R. Einer (ed), "Research Handbook on the Economics of Antitrust Law" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on the Economics of Antitrust Law

Editor(s): Elhauge, R. Einer

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848440807

Section: Chapter 4

Section Title: Mergers that Eliminate Potential Competition

Author(s): Kwoka, John

Number of pages: 29

Extract:

4 Mergers that eliminate potential competition
John Kwoka


I INTRODUCTION

Modern merger analysis began with the promulgation of the 1982 Merger Guidelines by
the Antitrust Division of the Department of Justice and the Federal Trade Commission.
Those Guidelines focused on harm to competition from various types of mergers, prima-
rily those between direct horizontal competitors but also including vertical mergers and
those that `eliminate[d] specific potential entrants'.1 As part of the latter concern, section
4.11 of the Guidelines endorsed the `theory of potential competition' ­ the proposition
that a merger between an incumbent firm and another at the `edge of the market' could
adversely affect competition ­ and outlined an analytical framework for policy toward
such mergers.
From that point the doctrine of potential competition has had an unusual history, both
in subsequent revisions of the Merger Guidelines and in enforcement practice. The revi-
sions issued in 1984, 1992, and 1997 extended and clarified the Guidelines with respect to
particular issues (entry, efficiencies, and competitive effects) but they notably omitted any
explicit reference to potential competition. While the agencies provided an accompanying
statement asserting there was `no change in their policy toward non-horizontal mergers'2
(a category that included potential competition), it seemed clear that potential competi-
tion concerns had been downgraded. The reasons for this change in policy appeared to
be a combination of a more stringent legal standard of proof for potential competition
mergers and a progressive decline in overall merger challenges as the antitrust agencies
...