Potential Competitive Effects of Vertical Mergers: A How-To Guide for Practitioners

The purpose of this short article is to aid practitioners in analyzing the competitive effects of vertical and complementary product mergers. It is also intended to assist the agencies if and when they undertake revision of the 1984 U.S. Vertical Merger Guidelines. Those Guidelines are out of date and do not reflect current enforcement or economic thinking about the potential competitive effects of vertical mergers. Nor do they provide the tools needed to carry out a modern competitive effects analysis. This article is intended to partially fill the gap by summarizing the various potential competitive harms and benefits that can occur in vertical mergers and the types of economic and factual analysis of competitive effects that can be applied to those mergers during the HSR review process. The analysis in the article also identifies several legal and policy issues that the agencies would consider when they undertake the process of revising the Vertical Merger Guidelines. The Appendix contains a listing and summary of the vertical merger cases challenged by the DOJ and FTC since 1994

Revising the U.S. Vertical Merger Guidelines: Policy Issues and an Interim Guide for Practitioners

Mergers and acquisitions are a major component of antitrust law and practice. The U.S. antitrust agencies spend a majority of their time on merger enforcement. The focus of most merger review at the agencies involves horizontal mergers, that is, mergers among firms that compete at the same level of production or distribution. Vertical mergers combine firms at different levels of production or distribution. In the simplest case, a vertical merger joins together a firm that produces an input (and competes in an input market) with a firm that uses that input to produce output (and competes in an output market). Over the years, the agencies have issued Merger Guidelines that outline the type of analysis carried out by the agencies and the agencies’ enforcement intentions in light of state of the law. These Guidelines are used by agency staff in evaluating mergers, as well as by outside counsel and the courts. Guidelines for vertical mergers were issued in 1968 and revised in 1984. However, the Vertical Merger Guidelines have not been revised since 1984. Those Guidelines are now woefully out of date. They do not reflect current economic thinking about vertical mergers. Nor do they reflect current agency practice. Nor do they reflect the analytic approach taken in the 2010 Horizontal Merger Guidelines. As a result, practitioners and firms lack the benefits of up-to-date guidance from the U.S. enforcement agencies

The 2020 Vertical Merger Guidelines: A Suggested Revision (March 26, 2020)

The FTC and DOJ requested comments on their draft Vertical Merger Guidelines in January 2020. This article is a complete alternative set of suggested Vertical Merger Guidelines that reflects and supplements the approach explained in the comments submitted by the author along with Jonathan. Baker, Nancy Rose and Fiona Scott Morton, as well as their other comments, and might be read in conjunction with those comments. This suggested revision of the Agencies’ draft expands the list of potential competition harms and provides illustrative examples. It expands and unifies the discussion and treatment of potential competitive benefits. It deletes the quasi-safe harbor and suggests the circumstances under which competitive harms raise lessened concerns on the one hand and heightened concerns on the other

Integrated Solutions Development Capital Solutions Interim Report Volume I: Report

This report analyzes the water quality, flood, erosion, and integrated scores of multiple Austin watersheds, including Waller Creek.Waller Creek Working Grou

Five Principles for Vertical Merger Enforcement Policy

There seems to be consensus that the Department of Justice’s 1984 Vertical Merger Guidelines do not reflect either modern theoretical and empirical economic analysis or current agency enforcement policy. Yet widely divergent views of preferred enforcement policies have been expressed among agency enforcers and commentators. Based on our review of the relevant economic literature and our experience analyzing vertical mergers, we recommend that the enforcement agencies adopt five principles: (i) The agencies should consider and investigate the full range of potential anticompetitive harms when evaluating vertical mergers; (ii) The agencies should decline to presume that vertical mergers benefit competition on balance in the oligopoly markets that typically prompt agency review, nor set a higher evidentiary standard based on such a presumption; (iii) The agencies should evaluate claimed efficiencies resulting from vertical mergers as carefully and critically as they evaluate claimed efficiencies resulting from horizontal mergers, and require the merging parties to show that the efficiencies are verifiable, merger-specific and sufficient to reverse the potential anticompetitive effects; (iv) The agencies should decline to adopt a safe harbor for vertical mergers, even if rebuttable, except perhaps when both firms compete in unconcentrated markets; (v) The agencies should consider adopting rebuttable anticompetitive presumptions that a vertical merger harms competition when certain factual predicates are satisfied. We do not intend these presumptions to describe all the ways by which vertical mergers can harm competition, so the agencies should continue to investigate vertical mergers that raise concerns about input and customer foreclosure, loss of a disruptive or maverick firm, evasion of rate regulation or other threats to competition, even if the specific factual predicates of the presumptions are not satisfied

Analyzing Vertical Mergers to Avoid False Negatives: Three Recent Case Studies

This article analyzes three recent vertical mergers: a private antitrust case attacking the consummated merger of Jeld-Wen and Craftmaster Manufacturing Inc. (“CMI”) that was cleared by the DOJ in 2012 but subsequently litigated and won by the plaintiff, Steves & Sons in 2018; and two recent vertical merger matters investigated and cleared (with limited remedies) by 3-2 votes by the Federal Trade Commission in early 2019 -- Staples/Essendant and Fresenius/NxStage. There are some factual parallels among these three matters that make it interesting to analyze them together. First, the DOJ’s decision to clear Jeld-Wen/CMI merger appears to be a clear false negative, and the two dissenting Commissioner suggest that the recent FTC decisions similarly are false negatives. Second, the DOJ and possibly the FTC in Staples/Essendant may have overlooked the “Frankenstein Monster” scenario of input foreclosure. Third, both the DOJ and the FTC in Fresenius/NxStage also apparently relied on the absence of complaints in making their clearance decisions. The analysis of these mergers also suggests several policy implications involving the need to analyze the full range of anticompetitive concerns, the potential for merger retrospectives by independent (as opposed to staff) researchers, the height of the evidentiary burden on the agencies to show competitive harm in light of their limited budgets, and the need for greater transparency in Commission statements, as well as the potential errors in relying on a lack of complaints

Payment for Environmental Services: First Global Inventory of Schemes Provisioning Water for Cities

In the perspective of the World Water Day 2011 - "Water for Cities" (March 22, 2011), the Natural Resources Land and Water Division (NRL) of FAO has launched an inventory of environmental schemes provisioning water to cities. Up to date there have been several studies addressing the payment for watershed services around the world, conducted by various UN agencies, NGOs, etc. None of these studies so far has focused on the PES schemes providing the water supply for cities and industries, i.e. urban areas. In that sense this inventory is unique. The report offers a very useful inventory of identified PES - "water for cities" schemes around the world. The report can be used as basis for further pursuit of information and analysis of the most relevant cases at least, and possible replication of these cases, primarily in East Africa that has become an area of interest lately for the potential development of this market based scheme in order to address the water issues of the region

How does big data affect GDP? Theory and evidence for the UK

We present an economic approach to measuring the impact of Big Data on GDP and GDP growth. We define data, information, ideas and knowledge. We present a conceptual framework to understand and measure the production of “Big Data”, which we classify as transformed data and data-based knowledge. We use this framework to understand how current official datasets and concepts used by Statistics Offices might already measure Big Data in GDP, or might miss it. We also set out how unofficial data sources might be used to measure the contribution of data to GDP and present estimates on its contributions to growth. Using new estimates of employment and investment in Big Data as set out in Chebli, Goodridge et al. (2015) and Goodridge and Haskel (2015a) and treating transformed data and data-based knowledge as capital assets, we estimate that for the UK: (a) in 2012, “Big Data” assets add £1.6bn to market sector GVA; (b) in 2005-2012, account for 0.02% of growth in market sector value-added; (c) much Big Data activity is already captured in the official data on software – 76% of investment in Big Data is already included in official software investment, and 76% of the contribution of Big Data to GDP growth is also already in the software contribution; and (d) in the coming decade, data-based assets may contribute around 0.07% to 0.23% pa of annual growth on average

An Economic Approach to Article 82

This report argues in favour of an economics-based approach to Article 82, in a way similar to the reform of Article 81 and merger control. In particular, we support an effects-based rather than a form-based approach to competition policy. Such an approach focuses on the presence of anti-competitive effects that harm consumers, and is based on the examination of each specific case, based on sound economics and grounded on facts