Fuzzy Economics with the New Old Theory of Competitive Harm in Merger Enforcement

01 July 2004
Dr. Ramsey Shehadeh

It has been over 20 years since the Department of Justice (DOJ) and the Federal Trade Commission (FTC) issued their first set of Horizontal Merger Guidelines. Although the Guidelines were revised in 1992 and 1997, they have, for the most part, stood the test of time. However, merger analysis continues to evolve, and notwithstanding the durability of the underlying principles, the way in which the Guidelines are applied remains the subject of much scrutiny and debate.

In this chapter from Economics of Antitrust: New Issues, Questions, and Insights, NERA Senior Vice President Dr. Ramsey Shehadeh highlights some of the important issues and questions raised by recent actions by the DOJ and FTC. Specifically, he discusses the economic analyses that have been applied to determine the potential for coordinated pricing after a merger. In his discussion of several recent merger reviews by the DOJ and FTC, he explains the importance of maintaining intellectual consistency between the analysis of market definition and the theory of coordinated competitive effects. As he explains, the failure to do so can lead to fuzzy economic reasoning.