Federal Trade Commission (FTC) Chairwoman Edith Ramirez delivered remarks at the Ninth Annual Global Antitrust Enforcement Symposium on the Horizontal Merger Guidelines and how the FTC has applied them since they were revised in 2010.
On September 30, 2015, Federal Trade Commission (FTC) Chairwoman Edith Ramirez delivered remarks at the Global Antitrust Enforcement Symposium on how the FTC has applied the Horizontal Merger Guidelines (Guidelines) since they were revised in 2010. In her remarks, Chairwoman Ramirez focused on two areas of antitrust analysis that saw increased prominence as a result of the revisions, including:
Competitive effects.
Unilateral effects.
Chairwoman Ramirez also briefly addressed how the FTC views merger efficiencies and convergence of international merger guidelines.
Competitive Effects
Chairwoman Ramirez stated that one of the major 2010 revisions to the Guidelines involved expanding the focus on competitive effects to more than just a change in market concentration. Chairwoman Ramirez explained that while under the 1992 Guidelines a change in market concentration was the first step in merger analysis (followed by analysis of adverse competitive effects), the 2010 Guidelines clarify that market concentration is just one way to understand a merger's potential competitive effects. Chairwoman Ramirez further noted that while a market definition analysis may be helpful in evaluating a merger, it may also be unnecessary if the FTC is able to immediately evaluate the merger's potential harm to competition.
Chairwoman Ramirez emphasized, however, that market structure and market share statistics remain important in some cases, especially those involving potential coordinated effects. Chairwoman Ramirez also noted that courts continually use market concentration statistics to determine if a merger would likely harm competition.
Unilateral Effects
Chairwoman Ramirez noted that another major 2010 revision to the Guidelines was to increase focus on unilateral effects. Chairwoman Ramirez explained that the FTC uses diversion ratios, which measure the percentage of lost sales following a price increase by firm A that is captured by competing firm B, to measure the closeness of competition between the firms. A high diversion ratio indicates that the two firms' products are close substitutes and that a merger of the firms is more likely to result in significant unilateral effects.
Chairwoman Ramirez observed that the FTC will also estimate the gross upward pricing pressure index (GUPPI) to provide a quantifiable measure of a firm's post-merger incentive to raise prices.
Chairwoman Ramirez explained that unilateral effects analysis is also used for:
Chairwoman Ramirez briefly addressed merger efficiencies, and stated that the 2010 Guidelines require that an efficiencies defense be:
Merger-specific.
Verifiable.
Not based on anticompetitive reductions on output or service.
She noted that while efficiencies defenses often do not succeed in court, they can play a role in the FTC's decision to bring a challenge.
International Merger Guidelines
Chairwoman Ramirez noted that overall, the analytical framework of international merger guidelines has converged to effects-based analysis, with an increased focus on:
Unilateral effects.
Econometric tools.
Chairwoman Ramirez attributed the rise in usage of econometric tools to:
The increased sensitivity and precision of those tools.