Coordinated Interaction: Pre-merger Constraints and Post-merger Effects

Concern about coordinated effects long has been central to U.S. merger policy. The first sets of Horizontal Merger Guidelines (“Guidelines”), issued by the Department of Justice in 1982 and 1984, focused their attention squarely on coordinated effects.1 The language of the 1984 Guidelines articulated the “unifying theme . . . that mergers should not be permitted to create or enhance ‘market power’ or to facilitate its exercise,” and went on to note that “[w]here only a few firms account for most of the sales of a product, those firms can in some circumstances either explicitly or implicitly coordinate their actions in order to approximate the performance of a monopolist.”2 In an important antitrust case just two years later, Judge Richard Posner echoed this view when he wrote that the “ultimate issue” in reviewing a merger under the antitrust laws is “whether the challenged acquisition is likely to hurt consumers, as by making it easier for the firms in a market to collude, expressly or tacitly, and thereby force price above or farther above the competitive level.”3 In the last five years alone, the Antitrust Division and the Federal Trade Commission (“FTC”) have successfully challenged 11 proposed mergers under a coordinated effects theory. The agencies won either partial divestitures or complete abandonment of those proposed consolidations.4