Five Principles for Vertical Merger Enforcement Policy

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The widely divergent views about enforcement policy that we noted in our introduction may make it hard for practitioners to counsel clients about vertical mergers or advocate before the agencies, whether they are supporting or questioning the transaction. Our analysis can be particularly useful for those advocates who may have wrongly supposed that vertical mergers should or will be presumed to benefit competition. As we have explained, modern economic analysis does not support a relaxed approach to vertical merger review and enforcement. For that reason, advocates should address the full range of potential competitive harms, with reference to the specific facts of their transaction, and apply the rigorous mainstream modern economic thinking that we have relied upon. For the same reason, advocates should analyze carefully the magnitude of claimed efficiencies, their merger specificity, and the likelihood that they would reverse the potential anticompetitive effect. We are also writing for the enforcement agencies, by setting forth our views on critical issues regarding vertical merger enforcement policy that the Commission must address in any hearings report and the agencies must resolve in formulating revised vertical merger guidelines. We have recommended these five principles to anchor effective vertical merger enforcement by reducing false negatives while keeping false positives low. We hope that the agencies will agree and follow our recommendations even before they release new vertical merger guidelines. These recommendations also could be useful if the Congress decides to amend Section 7 of the Clayton Act.