Corporate & Securities Law

Whoa There, Big Fellows!

The DoJ/FTC revised merger guidelines, released as a draft for public comment yesterday, have me scratching my head. I need to spend more time with them before I come to any strong views, but the obvious issue-spotter is the elimination of market definition as a necessary step in the analysis.

So we all know that market definition is sometimes or often a formalistic and technical step that ends up bearing little relation to the analysis that follows. I’m happy to be persuaded that we should abandon it as a necessary prerequisite in all kinds of antitrust cases.

Problem is, the official dogma from the courts is still that defining a relevant market is a “necessary prerequisite” to finding liability under the Clayton Act. See Judge Walker in Oracle, for example, quoting the Supreme Court in duPont. So if I were grading the draft Guidelines as an exam, I would put a big X through the statement on the FTC website that “market definition is not an end itself or a necessary starting point of merger analysis, but instead a tool that is useful to the extent it illuminates the merger?s likely competitive effects.”

Of course, only a couple of contestable merger cases get tried in the courts a year and the second request threat gives the agencies effective power to stop mergers that they might not be able to block in court, so maybe we shouldn’t worry too much if the Guidelines don’t track the law. But do we want the agencies to lose the habit of thinking in relevant market terms? As long as the law requires it, I should think that the agencies should make themselves go through the exercise. Otherwise, they are going to develop intellectual laziness on market definition over time. Or, they will develop cases for internal assessment based on other theories and then have to scramble to invent relevant market theories of the case if it heads to litigation.

Maybe the agencies think that a guidelines revision that downplays market definition will lead the courts to downplay it as well. That strikes me as possible, but a gamble. More likely, the revised Guidelines will result in more Oracle-PeopleSofts, where the agencies lose the case on market definition. But, with spring in the air here in Michigan, I’m feeling optimistic and susceptible to persuasion.

Someone persuade me I’m wrong.

Full post as published by Truth on the Market on April 21, 2010 (boomark / email).