Know The Capacity Closure Analysis In Horizontal Mergers

The U.S. antitrust agencies have long evaluated mergers in homogeneous product markets to determine “whether the merged firm will find it profitable unilaterally to suppress output and elevate the market price.”[1] But the U.S. Department of Justice had not publicly disclosed a formal economic method to analyze output suppression concerns until 2007, when it required two large newsprint manufacturers to divest a newsprint mill because of concerns that the combined firm would try to raise price by “strategically closing, idling, or converting some of its capacity.”[2] This “capacity closure” model has since been applied to other paper product markets[3], and similar considerations have motivated the DOJ to require divestitures in other industries[4], including most recently in connection with the establishment of the Ardent Mills wheat-milling joint venture among ConAgra, Cargill and CHS.[5]