U.S. Department of Justice and the Federal Trade Commission

Merger Guidelines

U.S. Department of Justice and the Federal Trade Commission

Issued: December 18, 2023

1. Overview

These Merger Guidelines identify the procedures and enforcement practices the Department of

Justice and the Federal Trade Commission (the “Agencies”) most often use to investigate whether

mergers violate the antitrust laws. The Agencies enforce the federal antitrust laws, specifically Sections

1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2; Section 5 of the Federal Trade Commission Act, 15

U.S.C. § 45; and Sections 3, 7, and 8 of the Clayton Act, 1 15 U.S.C. §§ 14, 18, 19. 2 Congress has

charged the Agencies with administering these statutes as part of a national policy to promote open and

fair competition, including by preventing mergers and acquisitions that would violate these laws.

“Federal antitrust law is a central safeguard for the Nation’s free market structures” that ensures “the

preservation of economic freedom and our free-enterprise system.” 3 It rests on the premise that “[t]he

unrestrained interaction of competitive forces will yield the best allocation of our economic resources,

the lowest prices, the highest quality and the greatest material progress, while at the same time providing

an environment conducive to the preservation of our democratic political and social institutions.” 4

Section 7 of the Clayton Act (“Section 7”) prohibits mergers and acquisitions where “in any line

of commerce or in any activity affecting commerce in any section of the country, the effect of such

acquisition may be substantially to lessen competition, or to tend to create a monopoly.” Competition is

a process of rivalry that incentivizes businesses to offer lower prices, improve wages and working

conditions, enhance quality and resiliency, innovate, and expand choice, among many other benefits.

Mergers that substantially lessen competition or tend to create a monopoly increase, extend, or entrench

market power and deprive the public of these benefits. Mergers can lessen competition when they

diminish competitive constraints, reduce the number or attractiveness of alternatives available to trading

partners, or reduce the intensity with which market participants compete.

Section 7 was designed to arrest anticompetitive tendencies in their incipiency. 5 The Clayton Act

therefore requires the Agencies to assess whether mergers present risk to competition. The Supreme

Court has explained that “Section 7 itself creates a relatively expansive definition of antitrust liability:

To show that a merger is unlawful, a plaintiff need only prove that its effect ‘may be substantially to

lessen competition’” or to tend to create a monopoly. 6 Accordingly, the Agencies do not attempt to

predict the future or calculate precise effects of a merger with certainty. Rather, the Agencies examine

the totality of the evidence available to assess the risk the merger presents.

As amended under the Celler-Kefauver Antimerger Act of 1950, Pub. L. No. 81-899, 64 Stat. 1125 (1950), and the HartScott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a.

2

Although these Guidelines focus primarily on Section 7 of the Clayton Act, the Agencies consider whether any of these

statutes may be violated by a merger. The various provisions of the Sherman, Clayton, and FTC Acts each have separate

standards, and one may be violated when the others are not.

3

North Carolina State Bd. of Dental Examiners v. FTC, 574 U.S. 494, 502 (2015).

4

NCAA v. Board of Regents, 468 U.S. 85, 104 n.27 (1984) (quoting Northern Pac. R. Co. v. United States, 356 U.S. 1, 4-5

(1958)); see also NCAA v. Alston, 141 S. Ct. 2141, 2147 (2021) (quoting Board of Regents, 468 U.S. at 104 n.27).

5

See, e.g., Brown Shoe Co. v. United States, 370 U.S. 294, 318 nn.32-33 (1962); see also United States v. AT&T, Inc., 916

F.3d 1029, 1032 (D.C. Cir. 2019) (Section 7 “halt[s] incipient monopolies and trade restraints outside the scope of the

Sherman Act.” (quoting Brown Shoe, 370 U.S. at 318 n.32)); Saint Alphonsus Medical Center-Nampa v. St. Luke’s, 778 F.3d

775, 783 (9th Cir. 2015) (Section 7 “intended to arrest anticompetitive tendencies in their incipiency.” (quoting Brown Shoe,

370 U.S. at 322)); Polypore Intern., Inc. v. FTC, 686 F.3d 1208, 1213-14 (11th Cir. 2012) (same). Some other aspects of

Brown Shoe have been subsequently revisited.

6

California v. Am. Stores Co., 495 U.S. 271, 284 (1990) (quoting 15 U.S.C. § 18 with emphasis) (citing Brown Shoe, 370

U.S. at 323).

1

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Competition presents itself in myriad ways. To assess the risk of harm to competition in a

dynamic and complex economy, the Agencies begin the analysis of a proposed merger by asking: how

do firms in this industry compete, and does the merger threaten to substantially lessen competition or to

tend to create a monopoly?

The Merger Guidelines set forth several different analytical frameworks (referred to herein as

“Guidelines”) to assist the Agencies in assessing whether a merger presents sufficient risk to warrant an

enforcement action. These frameworks account for industry-specific market realities and use a variety of

indicators and tools, ranging from market structure to direct evidence of the effect on competition, to

examine whether the proposed merger may harm competition.

How to Use These Guidelines: When companies propose a merger that raises concerns under

one or more Guidelines, the Agencies closely examine the evidence to determine if the facts are

sufficient to infer that the effect of the merger may be to substantially lessen competition or to tend to

create a monopoly (sometimes referred to as a “prima facie case”). 7 Section 2 describes how the

Agencies apply these Guidelines. Specifically, Guidelines 1-6 describe distinct frameworks the

Agencies use to identify that a merger raises prima facie concerns, and Guidelines 7-11 explain how to

apply those frameworks in several specific settings. In all of these situations, the Agencies will also

examine relevant evidence to determine if it disproves or rebuts the prima facie case and shows that the

merger does not in fact threaten to substantially lessen competition or tend to create a monopoly.

Section 3 identifies rebuttal evidence that the Agencies consider, and that merging parties can present,

to rebut an inference of potential harm under these frameworks. 8 Section 4 sets forth a non-exhaustive

discussion of analytical, economic, and evidentiary tools the Agencies use to evaluate facts, understand

the risk of harm to competition, and define relevant markets.

These Guidelines are not mutually exclusive, as a single transaction can have multiple effects or

raise concerns in multiple ways. To promote efficient review, for any given transaction the Agencies

may limit their analysis to any one Guideline or subset of Guidelines that most readily demonstrates the

risks to competition from the transaction.

Guideline 1: Mergers Raise a Presumption of Illegality When They Significantly Increase

Concentration in a Highly Concentrated Market. Market concentration is often a useful indicator of a

merger’s likely effects on competition. The Agencies therefore presume, unless sufficiently disproved or

rebutted, that a merger between competitors that significantly increases concentration and creates or

further consolidates a highly concentrated market may substantially lessen competition.

Guideline 2: Mergers Can Violate the Law When They Eliminate Substantial Competition

Between Firms. The Agencies examine whether competition between the merging parties is substantial

since their merger will necessarily eliminate any competition between them.

See, e.g., United States v. AT&T, Inc., 916 F.3d at 1032 (explaining that a prima facie case can demonstrate a “reasonable

probability” of harm to competition either through “statistics about the change in market concentration” or a “fact-specific”

showing (quoting Brown Shoe, 370 U.S. at 323 n.39)); United States v. Baker Hughes, 908 F.2d 981, 982-83 (D.C. Cir. 1990).

8

These Guidelines pertain only to the Agencies’ consideration of whether a merger or acquisition may substantially lessen

competition or tend to create a monopoly. The consideration of remedies appropriate for mergers that pose that risk is beyond

the Merger Guidelines’ scope. The Agencies review proposals to revise a merger in order to alleviate competitive concerns

consistent with applicable law regarding remedies.

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2

Guideline 3: Mergers Can Violate the Law When They Increase the Risk of Coordination. The

Agencies examine whether a merger increases the risk of anticompetitive coordination. A market that is

highly concentrated or has seen prior anticompetitive coordination is inherently vulnerable and the

Agencies will infer, subject to rebuttal evidence, that the merger may substantially lessen competition.

In a market that is not highly concentrated, the Agencies investigate whether facts suggest a greater risk

of coordination than market structure alone would suggest.

Guideline 4: Mergers Can Violate the Law When They Eliminate a Potential Entrant in a

Concentrated Market. The Agencies examine whether, in a concentrated market, a merger would (a)

eliminate a potential entrant or (b) eliminate current competitive pressure from a perceived potential

entrant.

Guideline 5: Mergers Can Violate the Law When They Create a Firm That May Limit Access to

Products or Services That Its Rivals Use to Compete. When a merger creates a firm that can limit

access to products or services that its rivals use to compete, the Agencies examine the extent to which

the merger creates a risk that the merged firm will limit rivals’ access, gain or increase access to

competitively sensitive information, or deter rivals from investing in the market.

Guideline 6: Mergers Can Violate the Law When They Entrench or Extend a Dominant Position.

The Agencies examine whether one of the merging firms already has a dominant position that the

merger may reinforce, thereby tending to create a monopoly. They also examine whether the merger

may extend that dominant position to substantially lessen competition or tend to create a monopoly in

another market.

Guideline 7: When an Industry Undergoes a Trend Toward Consolidation, the Agencies Consider

Whether It Increases the Risk a Merger May Substantially Lessen Competition or Tend to Create

a Monopoly. A trend toward consolidation can be an important factor in understanding the risks to

competition presented by a merger. The Agencies consider this evidence carefully when applying the

frameworks in Guidelines 1-6.

Guideline 8: When a Merger is Part of a Series of Multiple Acquisitions, the Agencies May

Examine the Whole Series. If an individual transaction is part of a firm’s pattern or strategy of multiple

acquisitions, the Agencies consider the cumulative effect of the pattern or strategy when applying the

frameworks in Guidelines 1-6.

Guideline 9: When a Merger Involves a Multi-Sided Platform, the Agencies Examine Competition

Between Platforms, on a Platform, or to Displace a Platform. Multi-sided platforms have

characteristics that can exacerbate or accelerate competition problems. The Agencies consider the

distinctive characteristics of multi-sided platforms when applying the frameworks in Guidelines 1-6.

Guideline 10: When a Merger Involves Competing Buyers, the Agencies Examine Whether It May

Substantially Lessen Competition for Workers, Creators, Suppliers, or Other Providers. The

Agencies apply the frameworks in Guidelines 1-6 to assess whether a merger between buyers, including

employers, may substantially lessen competition or tend to create a monopoly.

Guideline 11: When an Acquisition Involves Partial Ownership or Minority Interests, the

Agencies Examine Its Impact on Competition. The Agencies apply the frameworks in Guidelines 1-6

to assess if an acquisition of partial control or common ownership may substantially lessen competition.

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This edition of the Merger Guidelines consolidates, revises, and replaces the various versions of

Merger Guidelines previously issued by the Agencies. The revision builds on the learning and

experience reflected in those prior Guidelines and successive revisions. These Guidelines reflect the

collected experience of the Agencies over many years of merger review in a changing economy and

have been refined through an extensive public consultation process.

As a statement of the Agencies’ law enforcement procedures and practices, the Merger

Guidelines create no independent rights or obligations, do not affect the rights or obligations of private

parties, and do not limit the discretion of the Agencies, including their staff, in any way. Although the

Merger Guidelines identify the factors and frameworks the Agencies consider when investigating

mergers, the Agencies’ enforcement decisions will necessarily continue to require prosecutorial

discretion and judgment. Because the specific standards set forth in these Merger Guidelines will be

applied to a broad range of factual circumstances, the Agencies will apply them reasonably and flexibly

to the specific facts and circumstances of each merger.

Similarly, the factors contemplated in these Merger Guidelines neither dictate nor exhaust the

range of theories or evidence that the Agencies may introduce in merger litigation. Instead, they set forth

various methods of analysis that may be applicable depending on the availability and/or reliability of

information related to a given market or transaction. Given the variety of industries, market participants,

and acquisitions that the Agencies encounter, merger analysis does not consist of uniform application of

a single methodology. The Agencies assess any relevant and meaningful evidence to evaluate whether

the effect of a merger may be substantially to lessen competition or to tend to create a monopoly.

Merger review is ultimately a fact-specific exercise. The Agencies follow the facts and the law in

analyzing mergers as they do in other areas of law enforcement.

These Merger Guidelines include references to applicable legal precedent. References to court

decisions do not necessarily suggest that the Agencies would analyze the facts in those cases identically

today. While the Agencies adapt their analytical tools as they evolve and advance, legal holdings

reflecting the Supreme Court’s interpretation of a statute apply unless subsequently modified. These

Merger Guidelines therefore reference applicable propositions of law to explain core principles that the

Agencies apply in a manner consistent with modern analytical tools and market realities. References

herein do not constrain the Agencies’ interpretation of the law in particular cases, as the Agencies will

apply their discretion with respect to the applicable law in each case in light of the full range of

precedent pertinent to the issues raised by each enforcement action.

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2. Applying the Merger Guidelines

This section discusses the frameworks the Agencies use to assess whether a merger may

substantially lessen competition or tend to create a monopoly.

2.1.

Guideline 1: Mergers Raise a Presumption of Illegality When They

Significantly Increase Concentration in a Highly Concentrated Market.

Market concentration and the change in concentration due to the merger are often useful

indicators of a merger’s risk of substantially lessening competition. In highly concentrated markets, a

merger that eliminates a significant competitor creates significant risk that the merger may substantially

lessen competition or tend to create a monopoly. As a result, a significant increase in concentration in a

highly concentrated market can indicate that a merger may substantially lessen competition, depriving

the public of the benefits of competition.

The Supreme Court has endorsed this view and held that “a merger which produces a firm

controlling an undue percentage share of the relevant market, and results in a significant increase in the

concentration of firms in that market[,] is so inherently likely to lessen competition substantially that it

must be enjoined in the absence of [rebuttal] evidence.” 9 In the Agencies’ experience, this legal

presumption provides a highly administrable and useful tool for identifying mergers that may

substantially lessen competition.

An analysis of concentration involves calculating pre-merger market shares of products 10 within

a relevant market (see Section 4.3 for a discussion of market definition and Section 4.4 for more details

on computing market shares). The Agencies assess whether the merger creates or further consolidates a

highly concentrated market and whether the increase in concentration is sufficient to indicate that the

merger may substantially lessen competition or tend to create a monopoly. 11

The Agencies generally measure concentration levels using the Herfindahl-Hirschman Index

(“HHI”). 12 The HHI is defined as the sum of the squares of the market shares; it is small when there are

many small firms and grows larger as the market becomes more concentrated, reaching 10,000 in a

market with a single firm. Markets with an HHI greater than 1,800 are highly concentrated, and a change

of more than 100 points is a significant increase. 13 A merger that creates or further consolidates a highly

concentrated market that involves an increase in the HHI of more than 100 points 14 is presumed to

United States v. Phila. Nat’l Bank, 374 U.S. 321, 363 (1963); see, e.g., FTC v. v. Hackensack Meridian Health, Inc., 30

F.4th 160, 172-73 (3d Cir. 2022); United States v. AT&T, Inc., 916 F.3d at 1032.

10

These Guidelines use the term “products” to encompass anything that is traded between firms and their suppliers,

customers, or business partners, including physical goods, services, or access to assets. Products can be as narrow as an

individual brand, a specific version of a product, or a product that includes specific ancillary services such as the right to

return it without cause or delivery to the customer’s location.

11

Typically, a merger eliminates a competitor by bringing two market participants under common control. Similar concerns

arise if the merger threatens to cause the exit of a current market participant, such as a leveraged buyout that puts the target

firm at significant risk of failure.

12

The Agencies may instead measure market concentration using the number of significant competitors in the market. This

measure is most useful when there is a gap in market share between significant competitors and smaller rivals or when it is

difficult to measure shares in the relevant market.

13

For illustration, the HHI for a market of five equal firms is 2,000 (5 x 202 = 2,000) and for six equal firms is 1,667 (6 x

16.672 = 1667).

14

The change in HHI from a merger of firms with shares a and b is equal to 2ab. For example, in a merger between a firm

with 20% market share and a firm with 5% market share, the change in HHI is 2 x 20 x 5 = 200.

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5

substantially lessen competition or tend to create a monopoly. 15 The Agencies also may examine the

market share of the merged fnm: a merger that creates a fnm with a share over thi1iy percent is also

presumed to substantially lessen competition or tend to create a monopoly if it also involves an increase

in HHI of more than 100 points. 16

Indicator

Threshold for Structural Presumption

Market HHI greater than 1,800

Post-merger HHI

AND

Change in HHI greater than 100

Share greater than 30%

Merged Fiim's Market Share

AND

Change in HHI greater than 100

When exceeded, these concentration metrics indicate that a merger's effect may be to eliminate

substantial competition between the merging parties and may be to increase coordination among the

remaining competitors after the merger. This presumption of illegality can be rebutted or disproved. The

higher the concentration metrics over these thresholds, the greater the risk to competition suggested by

this market stm cture analysis and the stronger the evidence needed to rebut or disprove it.

2.2.

Guideline 2: Mergers Can Violate the Law When They Eliminate

Substantial Competition Between Firms.

A merger eliminates competition between the merging finns by bringing them under joint

control. 17 If evidence demonstrates substantial competition between the merging parties prior to the

15 The first merger guidelines to reference an HHI threshold were the merger guidelines issued in 1982. These guidelines

refen-ed to mergers with HHI above 1,000 as concentrated markets, with HHI between 1,000 and 1,800 as "moderately

concentrated" and above 1,800 as "highly concentrated," while they refeITed to an increase in HHI of 100 as a "significant

increase." Each subsequent iteration until 2010 maintained those thresholds. See Fed. Trade Comm'n & U.S. Dep't of Justice,

Horizontal Merger Guidelines§ 1.51 (1997); Fed. Trade Comm'n & U.S. Dep't of Justice, Horizontal Merger Guidelines

§ 1.51 (1992); U.S. Dep't of Justice, Merger Guidelines§ 3(A) (1982). During this time, courts routinely cited to the

guidelines and these HHI thresholds in decisions. See, e.g., Chicago Bridge & Iron Co. N. V. v. FTC, 534 F.3d 410, 431 (5th

Cir. 2008); FTC v. H.J. Heinz Co. , 246 F.3d 708, 716 (D.C. Cir. 2001); FTC v. Univ. Health, Inc., 938 F.2d 1206, 1211 (11th

Cir. 1991). Although the Agencies raised the thresholds for the 2010 guidelines, based on experience and evidence developed

since, the Agencies consider the original HHI thresholds to better reflect both the law and the risks of competitive ha1m

suggested by market sflucture and have therefore retumed to those thresholds.

16 Phi/a. Nat'! Bank, 374 U.S. at 364-65 ("Without attempting to specify the smallest market share which would still be

considered to threaten undue concenfl·ation, we are clear that 30% presents that threat.").

17

The competitive harm from the elimination of competition between the merging fnms, without considering the risk of

coordination, is sometimes refen-ed to as unilateral effects. The elimination of competition between the merging fmns can

also lessen competition with and among other competitors. When the elimination of competition between the merging fnms

leads them to compete less aggressively with one another, other fnms in the market can in tum compete less aggressively,

decreasing the overall intensity of competition.

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merger, that ordinarily suggests that the merger may substantially lessen competition. 18Although a

change in market structure can also indicate risk of competitive harm (see Guideline 1), an analysis of

the existing competition between the merging firms can demonstrate that a merger threatens competitive

harm independent from an analysis of market shares.

Competition often involves firms trying to win business by offering lower prices, new or better

products and services, more attractive features, higher wages, improved benefits, or better terms relating

to various additional dimensions of competition. This can include competition to research and develop

products or services, and the elimination of such competition may result in harm even if such products

or services are not yet commercially available. The more the merging parties have shaped one another’s

behavior, or have affected one another’s sales, profits, valuation, or other drivers of behavior, the more

significant the competition between them.

The Agencies examine a variety of indicators to identify substantial competition. For example:

Strategic Deliberations or Decisions. The Agencies may analyze the extent of competition

between the merging firms by examining evidence relating to strategic deliberations or decisions in the

regular course of business. For example, in some markets, the firms may monitor each other’s pricing,

marketing campaigns, facility locations, improvements, products, capacity, output, input costs, and/or

innovation plans. This can provide evidence of competition between the merging firms, especially when

they react by taking steps to preserve or enhance the competitiveness or profitability of their own

products or services.

Prior Merger, Entry, and Exit Events. The Agencies may look to historical events to assess the

presence and substantiality of direct competition between the merging firms. For example, the Agencies

may examine the competitive impact of recent relevant mergers, entry, expansion, or exit events.

Customer Substitution. Customers’ willingness to switch between different firms’ products is an

important part of the competitive process. Firms are closer competitors the more that customers are

willing to switch between their products. The Agencies use a variety of tools, detailed in Section 4.2, to

assess customer substitution.

Impact of Competitive Actions on Rivals. When one firm takes competitive actions to attract

customers, this can benefit the firm at the expense of its rivals. The Agencies may gauge the extent of

competition between the merging firms by considering the impact that competitive actions by one of the

merging firms has on the other merging firm. The impact of a firm’s competitive actions on a rival is

generally greater when customers consider the firm’s products and the rival’s products to be closer

substitutes, so that a firm’s competitive action results in greater lost sales for the rival, and when the

profitability of the rival’s lost sales is greater.

Impact of Eliminating Competition Between the Firms. In some instances, evidence may be

available to assess the impact of competition from one firm on the other’s actions, such as firm choices

about price, quality, wages, or another dimension of competition. Section 4.2 describes a variety of

approaches to measuring such impacts.

18

See also United States v. First Nat’l Bank & Trust Co. of Lexington, 376 U.S. 665, 669-70 (1964) (per curiam) (“[I]t [is]

clear that the elimination of significant competition between [merging parties] constitutes an unreasonable restraint of trade

in violation of § 1 of the Sherman Act. . . . It [can be] enough that the two . . . compete[], that their competition [is] not

insubstantial and that the combination [would] put an end to it.”); ProMedica Health Sys., Inc. v. FTC, 749 F.3d 559, 568-70

(6th Cir. 2014), cert. denied, 575 U.S. 996 (2015).

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Additional Evidence, Tools, and Metrics. The Agencies may use additional evidence, tools, and

metrics to assess the loss of competition between the firms. Depending on the realities of the market,

different evidence, tools, or metrics may be appropriate.

Section 4.2 provides additional detail about the approaches that the Agencies use to assess

competition between or among firms.

2.3.

Guideline 3: Mergers Can Violate the Law When They Increase the

Risk of Coordination.

The Agencies determine that a merger may substantially lessen competition when it

meaningfully increases the risk of coordination among the remaining firms in a relevant market or

makes existing coordination more stable or effective. 19 Firms can coordinate across any or all

dimensions of competition, such as price, product features, customers, wages, benefits, or geography.

Coordination among rivals lessens competition whether it occurs explicitly—through collusive

agreements between competitors not to compete or to compete less—or tacitly, through observation and

response to rivals. Because tacit coordination often cannot be addressed under Section 1 of the Sherman

Act, the Agencies vigorously enforce Section 7 of the Clayton Act to prevent market structures

conducive to such coordination.

Tacit coordination can lessen competition even when it does not rise to the level of an agreement

and would not itself violate the law. For example, in a concentrated market a firm may forego or soften

an aggressive competitive action because it anticipates rivals responding in kind. This harmful behavior

is more common the more concentrated markets become, as it is easier to predict the reactions of rivals

when there are fewer of them.

To assess the extent to which a merger may increase the likelihood, stability, or effectiveness of

coordination, the Agencies often consider three primary factors and several secondary factors. The

Agencies may consider additional factors depending on the market.

2.3.A. Primary Factors

The Agencies may conclude that post-merger market conditions are susceptible to coordinated

interaction and that the merger materially increases the risk of coordination if any of the three primary

factors are present.

Highly Concentrated Market. By reducing the number of firms in a market, a merger increases

the risk of coordination. The fewer the number of competitively meaningful rivals prior to the merger,

the greater the likelihood that merging two competitors will facilitate coordination. Markets that are

highly concentrated after a merger that significantly increases concentration (see Guideline 1) are

presumptively susceptible to coordination. If merging parties assert that a highly concentrated market is

not susceptible to coordination, the Agencies will assess this rebuttal evidence using the framework

described below. Where a market is not highly concentrated, the Agencies may still consider other risk

factors.

See Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 229-30 (1993) (“In the § 7 context, it has long

been settled that excessive concentration, and the oligopolistic price coordination it portends, may be the injury to

competition the Act prohibits.”).

19

8

Prior Actual or Attempted Attempts to Coordinate. Evidence that firms representing a

substantial share in the relevant market appear to have previously engaged in express or tacit

coordination to lessen competition is highly informative as to the market’s susceptibility to coordination.

Evidence of failed attempts at coordination in the relevant market suggest that successful coordination

was not so difficult as to deter attempts, and a merger reducing the number of rivals may tend to make

success more likely.

Elimination of a Maverick. A maverick is a firm with a disruptive presence in a market. The

presence of a maverick, however, only reduces the risk of coordination so long as the maverick retains

the disruptive incentives that drive its behavior. A merger that eliminates a maverick or significantly

changes its incentives increases the susceptibility to coordination.

2.3.B. Secondary Factors

The Agencies also examine whether secondary factors demonstrate that a merger may

meaningfully increase the risk of coordination, even absent the primary risk factors. Not all secondary

factors must be present for a market to be susceptible to coordination.

Market Concentration. Even in markets that are not highly concentrated, coordination becomes

more likely as concentration increases. The more concentrated a market, the more likely the Agencies

are to conclude that the market structure suggests susceptibility to coordination.

Market Observability. A market is more susceptible to coordination if a firm’s behavior can be

promptly and easily observed by its rivals. Rivals’ behavior is more easily observed when the terms

offered to customers are readily discernible and relatively observable (that is, known to rivals).

Observability can refer to the ability to observe prices, terms, the identities of the firms serving

particular customers, or any other competitive actions of other firms. Information exchange

arrangements among market participants, such as public exchange of information through

announcements or private exchanges through trade associations or publications, increase market

observability. Regular monitoring of one another’s prices or customers can indicate that the terms

offered to customers are relatively observable. Pricing algorithms, programmatic pricing software or

services, and other analytical or surveillance tools that track or predict competitor prices or actions

likewise can increase the observability of the market.

Competitive Responses. A market is more susceptible to coordination if a firm’s prospective

competitive reward from attracting customers away from its rivals will be significantly diminished by its

rivals’ likely responses. This is more likely to be the case the stronger and faster the responses from its

rivals because such responses reduce the benefits of competing more aggressively. Some factors that

increase the likelihood of strong or rapid responses by rivals include: (1) the market has few significant

competitors, (2) products in the relevant market are relatively homogeneous, (3) customers find it

relatively easy to switch between suppliers, (4) suppliers use algorithmic pricing, or (5) suppliers use

meeting-competition clauses. The more predictable are rivals’ responses to strategic actions or changing

competitive conditions, and the more interactions firms have across multiple markets, the greater the

susceptibility to coordination.

Aligned Incentives. Removing a firm that has different incentives from most other firms in a

market can increase the risk of coordination. For example, a firm with a small market share may have

less incentive to coordinate because it has more to gain from winning new business than other firms. The

same issue can arise when a merger more closely aligns one or both merging firms’ incentives with the

9

other firms in the market. In some cases, incentives might be aligned or strengthened when firms

compete with one another in multiple markets (“multi-market contact”). For example, firms might

compete less aggressively in some markets in anticipation of reciprocity by rivals in other markets. The

Agencies examine these and any other market realities that suggest aligned incentives increase

susceptibility to coordination.

Profitability or Other Advantages of Coordination for Rivals. The Agencies regard coordinated

interaction as more likely to occur when participants in the market stand to gain more from successful

coordination. Coordination generally is more profitable or otherwise advantageous for the coordinating

firms the less often customers substitute outside the market when firms offer worse terms.

Rebuttal Based on Structural Barriers to Coordination Unique to the Industry. When market

structure evidence suggests that a merger may substantially lessen competition through coordination, the

merging parties sometimes argue that anticompetitive coordination is nonetheless impossible due to

structural market barriers to coordinating. The Agencies consider this rebuttal evidence using the

framework in Section 3. In so doing, the Agencies consider whether structural market barriers to

coordination are “so much greater in the [relevant] industry than in other industries that they rebut the

normal presumption” of coordinated effects. 20 In the Agencies’ experience, structural conditions that

prevent coordination are exceedingly rare in the modern economy. For example, coordination is more

difficult when firms are unable to observe rivals’ competitive offerings, but technological change has

made this situation less common than in the past and reduced many traditional barriers or obstacles to

observing the behavior of rivals in a market. The greater the level of concentration in the relevant

market, the greater must be the structural barriers to coordination in order to show that no substantial

lessening of competition is threatened.

2.4.

Guideline 4: Mergers Can Violate the Law When They Eliminate a

Potential Entrant in a Concentrated Market.

Mergers can substantially lessen competition by eliminating a potential entrant. For instance, a

merger can eliminate the possibility that entry or expansion by one or both firms would have resulted in

new or increased competition in the market in the future. A merger can also eliminate current

competitive pressure exerted on other market participants by the mere perception that one of the firms

might enter. Both of these risks can be present simultaneously.

A merger that eliminates a potential entrant into a concentrated market can substantially lessen

competition or tend to create a monopoly. 21 The more concentrated the market, the greater the

magnitude of harm to competition from any lost potential entry and the greater the tendency to create a

monopoly. Accordingly, for mergers involving one or more potential entrants, the higher the market

concentration, the lower the probability of entry that gives rise to concern.

See H.J. Heinz Co., 246 F.3d at 724.

United States v. Marine Bancorp., 418 U.S. 602, 630 (1974). A concentrated market is one with an HHI greater than 1,000

(See Guideline 1, n.15).

20

21

10

2.4.A. Actual Potential Competition: Eliminating Reasonably Probable Future Entry

In general, expansion into a concentrated market via internal growth rather than via acquisition

benefits competition. 22 Merging a current and a potential market participant eliminates the possibility

that the potential entrant would have entered on its own—entry that, had it occurred, would have

provided a new source of competition in a concentrated market.

To determine whether an acquisition that eliminates a potential entrant into a concentrated

market may substantially lessen competition, 23 the Agencies examine (1) whether one or both 24 of the

merging firms had a reasonable probability of entering the relevant market other than through an

anticompetitive merger, and (2) whether such entry offered a substantial likelihood of ultimately

producing deconcentration of the market or other significant procompetitive effects. 25

Reasonable Probability of Entry. The Agencies’ starting point for assessment of a reasonable

probability of entry is objective evidence regarding the firm’s available feasible means of entry,

including its capabilities and incentives. Relevant objective evidence can include, for example, evidence

that the firm has sufficient size and resources to enter; evidence of any advantages that would make the

firm well-situated to enter; evidence that the firm has successfully expanded into similarly situated

markets in the past or already participates in adjacent or related markets; evidence that the firm has an

incentive to enter; or evidence that industry participants recognize the company as a potential entrant.

This analysis is not limited to whether the company could enter with its pre-merger production facilities,

but also considers overall capability, which can include the ability to expand or add to its capabilities on

its own or in collaboration with someone other than the acquisition target.

Subjective evidence that the company considered entering absent the merger can also indicate a

reasonable probability that the company would have entered without the merger. Subjective evidence

that the company considered organic entry as an alternative to merging generally suggests that, absent

the merger, entry would be reasonably probable.

Likelihood of Deconcentration or Other Significant Procompetitive Effects. New entry can

yield a variety of procompetitive effects, including increased output or investment, higher wages or

improved working conditions, greater innovation, higher quality, and lower prices. If the merging firm

had a reasonable probability of entering a highly concentrated relevant market, this suggests benefits

that would have resulted from its entry would be competitively significant, unless there is substantial

direct evidence that the competitive effect would be de minimis. To supplement the suggestion that new

entry yields procompetitive effects, the Agencies will consider projections of the potential entrant’s

See Ford Motor Co. v. United States, 405 U.S. 562, 587 (1972) (referring to the “typical[]” competitive concern when “a

potential entrant enters an oligopolistic market by acquisition rather than internal expansion” as being “that such a move has

deprived the market of the pro-competitive effect of an increase in the number of competitors”).

23

Harm from the elimination of a potential entrant can occur in markets that do not yet consist of commercial products, even

if the market concentration of the future market cannot be measured using traditional means. Where there are few equivalent

potential entrants, including one or both of the merging firms, that indicates that the future market, once commercialized, will

be concentrated. The Agencies will consider other potential entrants’ capabilities and incentives in comparison to the merging

potential entrant to assess equivalence.

24

United States v. Penn-Olin Chemical Co., 378 U.S. 158 (1964) (holding that a merger between two firms, each or both of

which might have entered the relevant market, could violate Section 7).

25

See id. at 175-76; Marine Bancorp., 418 U.S. at 622, 633 (“[T]he proscription expressed in § 7 against mergers ‘when a

“tendency” toward monopoly or [a] “reasonable likelihood” of a substantial lessening of competition in the relevant market is

shown’ applies alike to actual- and potential-competition cases.” (quoting Penn-Olin, 378 U.S. at 171)); see also Yamaha

Motor Co. v. FTC, 657 F.2d 971, 980-981 (8th Cir. 1981) (acquisition of potential entrant violated Section 7).

22

11

competitive significance, such as market share, its business strategy, the anticipated response of

competitors, or customer preferences or interest.

A merger of two potential entrants can also result in a substantial lessening of competition. The

merger need not involve a firm that has a commercialized product in the market or an existing presence

in the same geographic market. The Agencies analyze similarly mergers between two potential entrants

and those involving a current market participant and a potential entrant.

2.4.B. Perceived Potential Competition: Lessening of Current Competitive Pressure

A perceived potential entrant can stimulate competition among incumbents. That pressure can

prompt current market participants to make investments, expand output, raise wages, increase product

quality, lower product prices, or take other procompetitive actions. The acquisition of a firm that is

perceived by market participants as a potential entrant can substantially lessen competition by

eliminating or relieving competitive pressure.

To assess whether the acquisition of a perceived potential entrant may substantially lessen

competition, the Agencies consider whether a current market participant could reasonably consider one

of the merging companies to be a potential entrant and whether that potential entrant has a likely

influence on existing competition. 26

Market Participant Could Reasonably Consider a Firm to Be a Potential Entrant. The starting

point for this analysis is evidence regarding the company’s capability of entering or applying

competitive pressure. Objective evidence is highly probative and includes evidence of feasible means of

entry or communications by the company indicating plans to expand or reallocate resources in a way

that could increase competition in the relevant market. Objective evidence can be sufficient to find that

the firm is a potential entrant; it need not be accompanied by any subjective evidence of current market

participants’ internal perceptions or direct evidence of strategic reactions to the potential entrant. If such

evidence is available, it can weigh in favor of finding that a current market participant could reasonably

consider the firm to be a potential entrant.

Likely Influence on Existing Rivals. Direct evidence that the firm’s presence or behavior has

affected or is affecting current market participants’ strategic decisions is not necessary but can establish

a showing of a likely influence. Even without such direct evidence, circumstantial evidence that the

firm’s presence or behavior had an effect on the competitive reactions of firms in the market may also

show likely influence. Objective evidence establishing that a current market participant could reasonably

consider one of the merging firms to be a potential entrant can also establish that the firm has a likely

influence on existing market participants. Subjective evidence indicating that current market

participants—including, for example, customers, suppliers, or distributors—internally perceive the

merging firm to be a potential entrant can also establish a likely influence.

2.4.C. Distinguishing Potential Entry from Entry as Rebuttal

When evaluating a potentially unlawful merger of current competitors, the Agencies will assess

whether entry by other firms would be timely, likely, and sufficient to replace the lost competition using

the standards discussed in Section 3.2. The existence of a perceived or actual potential entrant may not

meet that standard when considering a merger between firms that already participate in the relevant

market. The competitive impact of perceived and actual potential entrants is typically attenuated

26

See United States v. Falstaff Brewing Corp., 410 U.S. 526, 533-36 (1973); Marine Bancorp., 418 U.S. at 624-25.

12

compared to competition between two current market participants. However, because concentrated

markets often lack robust competition, the loss of even an attenuated source of competition such as a

potential entrant may substantially lessen competition in such markets. Moreover, because the Agencies

seek to prevent threats to competition in their incipiency, the likelihood of potential entry that could

establish that a merger’s effect “may be” to substantially lessen competition will generally not equal the

likelihood of entry that would rebut a demonstrated risk that competition may be substantially lessened.

2.5.

Guideline 5: Mergers Can Violate the Law When They Create a Firm

that May Limit Access to Products or Services That Its Rivals Use to

Compete.

The Agencies evaluate whether a merger may substantially lessen competition when the merged

firm can limit access to a product, service, or route to market 27 that its rivals may use to compete.

Mergers involving products or services rivals may use to compete can threaten competition in several

ways, for example: (A) the merged firm could limit rivals’ access to the products or services, thereby

weakening or excluding them, lessening competition; (B) the merged firm may gain or increase access

to rivals’ competitively sensitive information, thereby facilitating coordination or undermining their

incentives to compete; or (C) the threat of limited access can deter rivals and potential rivals from

investing.

These problems can arise from mergers involving access to any products, services, or routes to

market that rivals use to compete, and that are competitively significant to those rivals, whether or not

they involve a traditional vertical relationship such as a supplier and distributor relationship. Many types

of related products can implicate these concerns, including products rivals currently or may in the future

use as inputs, products that provide distribution services for rivals or otherwise influence customers’

purchase decisions, products that provide or increase the merged firm’s access to competitively sensitive

information about its rivals, or complements that increase the value of rivals’ products. Even if the

related product is not currently being used by rivals, it might be competitively significant because, for

example, its availability enables rivals to obtain better terms from other providers in negotiations. The

Agencies refer to any product, service, or route to market that rivals use to compete in that market as a

“related product.”

The Agencies analyze competitive effects in the relevant market in which the merged firm

competes with rivals that use the related product. The Agencies do not always define a market around

the related product, although they may do so (see Section 2.5.A.2).

2.5.A. The Risk that the Merged Firm May Limit Access

A merger involving products, services, or routes to market that rivals use to compete may

substantially lessen competition when the merged firm has both the ability and incentive to limit access

to the related product so as to weaken or exclude some of its rivals (the “dependent” rivals) in the

relevant market.

The merged firm could limit access to the related product in different ways. It could deny rivals

access altogether, deny access to some features, degrade its quality, worsen the terms on which rivals

can access the related product, limit interoperability, degrade the quality of complements, provide less

A “route to market” refers to any way a firm accesses its trading partners, such as distribution channels, marketplaces, or

customers.

27

13

reliable access, tie up or obstruct routes to market, or delay access to product features, improvements, or

information relevant to making efficient use of the product. All these ways of limiting access are

sometimes referred to as “foreclosure.” 28

Dependent rivals can be weakened if limiting their access to the related product would make it

harder or more costly for them to compete; for example, if it would lead them to charge higher prices or

offer worse terms in the relevant market, reduce the quality of their products so that they were less

attractive to trading partners, or interfere with distribution so that those products were less readily

available. Competition can also be weakened if the merger facilitates coordination among the merged

firm and its rivals, for example by giving the merged firm the ability to threaten to limit access to

uncooperative rivals.

Rivals or potential rivals may be excluded from the relevant market if limiting their access to the

related product could lead them to exit the market or could deter them from entering. For example,

potential rivals may not enter if the merged firm ties up or obstructs so many routes to market that the

remaining addressable market is too small. Exclusion can arise when a new entrant would need to invest

not only in entering the relevant market, but also in supplying its own substitute for the related product,

sometimes referred to as two-stage entry or multi-level entry.

Because the merged firm could use its ability to limit access to the related product in a range of

ways, the Agencies focus on the overall risk that the merged firm will do so, and do not necessarily

identify which precise actions the merged firm would take to lessen competition.

2.5.A.1.

Ability and Incentive to Foreclose Rivals

The Agencies assess the merged firm’s ability and incentive to substantially lessen competition

by limiting access to the related product for a group of dependent rivals in the relevant market by

examining four factors.

1. Availability of Substitutes. The Agencies assess the availability of substitutes for the related

product. The merged firm is more able to limit access when there are few alternative options to the

merged firm’s related product, if these alternatives are differentiated in quality, price, or other

characteristics, or if competition to supply them is limited.

2. Competitive Significance of the Related Product. The Agencies consider how important the

related product is for the dependent firms and the extent to which they would be weakened or excluded

from the relevant market if their access was limited.

3. Effect on Competition in the Relevant Market. The Agencies assess the importance of the

dependent firms for competition in the relevant market. Competition can be particularly affected when

the dependent firms would be excluded from the market altogether.

4. Competition Between the Merged Firm and the Dependent Firms. The merged firm’s

incentive to limit the dependent firms’ access depends on how strongly it competes with them. If the

dependent firms are close competitors, the merged firm may benefit from higher sales or prices in the

relevant market when it limits their access. The Agencies may also assess the potential for the merged

firm to benefit from facilitating coordination by threatening to limit dependent rivals’ access to the

See Illumina, Inc. v. FTC, No. 23-60167, slip op. at 17 (5th Cir. Dec. 15, 2023) (“[T]here are myriad ways in which [the

merged firm] could engage in foreclosing behavior . . . such as by making late deliveries or subtly reducing the level of

support services.”).

28

14

related product. These benefits can make it profitable to limit access to the related product and thereby

substantially lessen competition, even though it would not have been profitable for the firm that

controlled the related product prior to the merger.

The Agencies assess the extent of competition with rivals and the risk of coordination using

analogous methods to the ones described in Guidelines 2 and 3, and Section 4.2.

*

*

*

In addition to the evidentiary, analytical, and economic tools in Section 4, the following

additional considerations and evidence may be important to this assessment:

Barriers to Entry and Exclusion of Rivals. The merged firm may benefit more from limiting

access to dependent rivals or potential rivals when doing so excludes them from the market, for example

by creating a need for the firm to enter at multiple levels and to do so with sufficient scale and scope

(multi-level entry).

Prior Transactions or Prior Actions. If firms used prior acquisitions or engaged in prior actions

to limit rivals’ access to the related product, or other products its rivals use to compete, that suggests that

the merged firm has the ability and incentive to do so. However, lack of past action does not necessarily

indicate a lack of incentive in the present transaction because the merger can increase the incentive to

foreclose.

Internal Documents. Information from business planning and merger analysis documents

prepared by the merging firms might identify instances where the firms believe they have the ability and

incentive to limit rivals’ access. Such documents, where available, are highly probative. The lack of

such documents, however, is less informative.

Market Structure. Evidence of market structure can be informative about the availability of

substitutes for the related product and the competition in the market for the related product or the

relevant market. (See Section 2.5.A.2)

2.5.A.2.

Analysis of Industry Factors and Market Structure

The Agencies also sometimes determine, based on an analysis of factors related to market

structure, that a merger may substantially lessen competition by allowing the merged firm to limit access

to a related product. 29 The Agencies’ assessment can include evidence about the structure, history, and

probable future of the market.

Structure of the Related Market. In some cases, the market structure of the related product

market can give an indication of the merged firm’s ability to limit access to the related product. In these

cases, the Agencies define a market (termed the “related market”) around the related product (see

Section 4.3). The Agencies then define the “foreclosure share” as the share of the related market to

which the merged firm could limit access. If the share or other evidence show that the merged firm is

approaching or has monopoly power over the related product, and the related product is competitively

significant, those factors alone are a sufficient basis to demonstrate that the dependent firms do not have

See Brown Shoe, 370 U.S. at 328-34; Illumina, slip op. at 20-22 (“There is no precise formula when it comes to applying

these factors. Indeed, the Supreme Court has found a vertical merger unlawful by examining only three of the Brown Shoe

factors.” (cleaned up)); Fruehauf Corp. v. FTC, 603 F.2d 345, 353 (2d Cir. 1979); U.S. Steel Corp. v. FTC, 426 F.2d 592, 599

(6th Cir. 1970).

29

15

adequate substitutes and the merged firm has the ability to weaken or exclude them by limiting their

access to the related product. (See Considerations 1 and 2 in Section 2.5.A.1). 30

Structure of the Relevant Market. Limiting rivals’ access to the related product will generally

have a greater effect on competition in the relevant market if the merged firm and the dependent rivals

face less competition from other firms. In addition, the merged firm has a greater incentive to limit

access to the dependent firms when it competes more closely with them. Market share and concentration

measures for the merged firm, the dependent rivals, and the other firms, can sometimes provide evidence

about both issues.

Nature and Purpose of the Merger. When the nature and purpose of the merger is to foreclose

rivals, including by raising their costs, that suggests the merged firm is likely to foreclose rivals.

Trend Toward Vertical Integration. The Agencies will generally consider evidence about the

degree of integration between firms in the relevant and related markets, as well as whether there is a

trend toward further vertical integration and how that trend or the factors driving it may affect

competition. A trend toward vertical integration may be shown through, for example: a pattern of

vertical integration following mergers by one or both of the merging companies; or evidence that a

merger was motivated by a desire to avoid having its access limited due to similar transactions among

other companies that occurred or may occur in the future.

*

*

*

If the parties offer rebuttal evidence, the Agencies will assess it under the approach laid out in

Section 3. 31 When assessing rebuttal evidence focused on the reduced profits of the merged firm from

limiting access from rivals, the Agencies examine whether the reduction in profits would prevent the full

range of reasonably probable strategies to limit access. When evaluating whether this rebuttal evidence

is sufficient to conclude that no substantial lessening of competition is threatened by the merger, the

Agencies will give little weight to claims that are not supported by an objective analysis, including, for

example, speculative claims about reputational harms. Moreover, the Agencies are unlikely to credit

claims or commitments to protect or otherwise avoid weakening the merged firm’s rivals that do not

align with the firm’s incentives. The Agencies’ assessment will be consistent with the principle that

firms act to maximize their overall profits and valuation rather than the profits of any particular business

See Brown Shoe, 370 U.S. at 328 (“If the share of the market foreclosed is so large that it approaches monopoly

proportions, the Clayton Act will, of course, have been violated . . . .”). The Agencies will generally infer, in the absence of

countervailing evidence, that the merging firm has or is approaching monopoly power in the related product if it has a share

greater than 50% of the related product market. A merger involving a related product with share of less than 50% may still

substantially lessen competition, particularly when that related product is important to its trading partners.

31

A common rebuttal argument is that the merger would lead to vertical integration of complementary products and as a

result, “eliminate double marginalization,” since in specific circumstances such a merger can confer on the merged firm an

incentive to decrease prices to purchasers. The Agencies examine whether elimination of double marginalization satisfies the

approach to evaluating procompetitive efficiencies in Section 3.3, including examining: (a) whether the merged firm will be

more vertically integrated as a result of the merger, for example because it increases the extent to which it uses internal

production of an input when producing output for the relevant market; (b) whether contracts short of a merger have

eliminated or could eliminate double marginalization such that it would not be merger-specific, and (c) whether the merged

firm has the incentive to reduce price in the relevant market given that such a reduction would reduce sales by the merged

firm’s rivals in the relevant market, which would in turn lead to reduced revenue and margin on sales of the related product to

the dependent rivals.

30

16

unit. A merger may substantially lessen competition or tend to create a monopoly regardless of the

claimed intent of the merging companies or their executives. (See Section 4.1)

If the merged firm has the ability and incentive to limit access to the related product and lessen

competition in the relevant market, there are many ways it could act on those incentives. The merging

parties may put forward evidence that there are no reasonably probable ways in which they could

profitably limit access to the related product and thereby make it harder for rivals to compete, or that the

merged firm will be more competitive because of the merger.

2.5.B. Mergers Involving Visibility into Rivals’ Competitively Sensitive Information

If rivals would continue to access or purchase a related product controlled by the merged firm

post-merger, the merger can substantially lessen competition if the merged firm would gain or increase

visibility into rivals’ competitively sensitive information. This situation could arise in many settings,

including, for example, if the merged firm learns about rivals’ sales volumes or projections from

supplying an input or a complementary product; if it learns about promotion plans and anticipated

product improvements or innovations from its role as a distributor; or if it learns about entry plans from

discussions with potential rivals about compatibility or interoperability with a complementary product it

controls. A merger that gives the merged firm increased visibility into competitively sensitive

information could undermine rivals’ ability or incentive to compete aggressively or could facilitate

coordination.

Undermining Competition. The merged firm might use visibility into a rival’s competitively

sensitive information to undermine competition from the rival. For example, the merged firm’s ability to

preempt, appropriate, or otherwise undermine the rival’s procompetitive actions can discourage the rival

from fully pursuing competitive opportunities. Relatedly, rivals might refrain from doing business with

the merged firm rather than risk that the merged firm would use their competitively sensitive business

information to undercut them. Those rivals might become less-effective competitors if they must rely on

less-preferred trading partners or accept less favorable trading terms because their outside options have

worsened or are more limited.

Facilitating Coordination. A merger that provides access to rivals’ competitively sensitive

information might facilitate coordinated interaction among firms in the relevant market by allowing the

merged firm to observe its rivals’ competitive strategies faster and more confidently. (See Guideline 3.)

2.5.C. Mergers that Threaten to Limit Rivals’ Access and Thereby Create Barriers to

Entry and Competition

When a merger gives a firm the ability and incentive to limit rivals’ access, or where it gives the

merged firm increased visibility into its rivals’ competitively sensitive information, the merger may

create entry barriers as described above. In addition, the merged firm’s rivals might change their

behavior because of the risk that the merged firm could limit their access. That is, the risk that the

merger will give a firm the ability and incentive to limit rivals’ access or will give the merged firm

increased visibility into sensitive information can dissuade rivals from entering the market or expanding

their operations.

Rivals or potential rivals that face the threat of foreclosure, or the risk of sharing sensitive

information with rivals, may reduce investment or adjust their business strategies in ways that lessen

competition. Firms may be reluctant to invest in a market if their success is dependent on continued

supply from a rival, particularly because the merged firm may become more likely to foreclose its

17

competitor as that competitor becomes more successful. Firms may use expensive strategies to try to

reduce their dependence on the merged firm, weakening the competitiveness of their products and

services. Even if the merged firm does not deliberately seek to weaken rivals, rivals or potential rivals

may fear that their access will be limited if the merged firm decides to use its own products exclusively.

These effects may occur irrespective of the merged firm’s incentive to limit access and are greater as the

merged firm gains greater control over more important inputs that those rivals use to compete.

2.6.

Guideline 6: Mergers Can Violate the Law When They Entrench or

Extend a Dominant Position.

The Agencies consider whether a merger may entrench or extend an already dominant position.

The effect of such mergers “may be substantially to lessen competition” or “may be . . . to tend to create

a monopoly” in violation of Section 7 of the Clayton Act. Indeed, the Supreme Court has explained that

a merger involving an “already dominant[] firm may substantially reduce the competitive structure of

the industry by raising entry barriers.” 32 The Agencies also evaluate whether the merger may extend that

dominant position into new markets. 33 Mergers that entrench or extend a dominant position can also

violate Section 2 of the Sherman Act. 34 At the same time, the Agencies distinguish anticompetitive

entrenchment from growth or development as a consequence of increased competitive capabilities or

incentives. 35 The Agencies therefore seek to prevent those mergers that would entrench or extend a

dominant position through exclusionary conduct, weakening competitive constraints, or otherwise

harming the competitive process.

To undertake this analysis, the Agencies first assess whether one of the merging firms has a

dominant position based on direct evidence or market shares showing durable market power. For

example, the persistence of market power can indicate that entry barriers exist, that further entrenchment

may tend to create a monopoly, and that there would be substantial benefits from the emergence of new

competitive constraints or disruptions. The Agencies consider mergers involving dominant firms in the

context of evidence about the sources of that dominance, focusing on the extent to which the merger

relates to, reinforces, or supplements these sources.

Creating or preserving dominance and the profits it brings can be an important motivation for a

firm to undertake an acquisition as well as a driver of the merged firm’s behavior after the acquisition.

In particular, a firm may be willing to undertake costly short-term strategies in order to increase the

chance that it can enjoy the longer-term benefits of dominance. A merger that creates or preserves

dominance may also reduce the merged firm’s longer-term incentives to improve its products and

services.

A merger can result in durable market power and long-term harm to competition even when it

initially provides short-term benefits to some market participants. Thus, the Agencies will consider not

just the impact of the merger holding fixed factors like product quality and the behavior of other

industry participants, but they may also consider the (often longer term) impact of the merger on market

FTC v. Procter & Gamble Co., 386 U.S. 568, 577-578 (1967); see, e.g., Fruehauf, 603 F.2d at 353 (the “entrenchment of a

large supplier or purchaser” can be an “essential” showing of a Section 7 violation).

33

Ford, 405 U.S. at 571 (condemning acquisition by dominant firm to obtain a foothold in another market when coupled with

incentive to create and maintain barriers to entry into that market).

34

See, e.g., United States v. Grinnell Corp., 384 U.S. 563 (1966) (acquisitions are among the types of conduct that may

violate the Sherman Act).

35

See, e.g., id. at 570-71.

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18

power and industry dynamics. Important dynamic competitive effects can arise through the entry,

investment, innovation, and terms offered by the merged firm and other industry participants, even when

the Agencies cannot predict specific reactions and responses with precision. If the ultimate result of the

merger is to protect or preserve dominance by limiting opportunities for rivals, reducing competitive

constraints, or preventing competitive disruption, then the Agencies will approach the merger with a

heightened degree of scrutiny. The degree of scrutiny and concern will increase in proportion to the

strength and durability of the dominant firm’s market power.

2.6.A. Entrenching a Dominant Position

Raising Barriers to Entry or Competition. A merger may create or enhance barriers to entry or

expansion by rivals that limit the capabilities or competitive incentives of other firms. Barriers to entry

can entrench a dominant position even if the nature of future entry is uncertain, if the identities of future

entrants are unknown, or if there is more than one mechanism through which the merged firm might

create entry barriers. Some examples of ways in which a merger may raise barriers to entry or

competition include:

•

Increasing Switching Costs. The costs associated with changing suppliers (often referred to

as switching costs) can be an important barrier to competition. A merger may increase

switching costs if it makes it more difficult for customers to switch away from the dominant

firm’s product or service, or when it gives the dominant firm control of something customers

use to switch providers or of something that lowers the overall cost to customers of switching

providers. For example, if a dominant firm merges with a complementary product that

interoperates with the dominant firm’s competitors, it could reduce interoperability, harming

competition for customers who value the complement.

•

Interfering With the Use of Competitive Alternatives. A dominant position may be threatened

by a service that customers use to work with multiple providers of similar or overlapping

bundles of products and services. If a dominant firm acquires a service that supports the use

of multiple providers, it could degrade its utility or availability or could modify the service to

steer customers to its own products, entrenching its dominant position. For example, a closed

messaging communication service might acquire a product that allowed users to send and

receive messages over several competing services through a single user interface, which

facilitates competition. The Agencies would examine whether the acquisition would entrench

the messaging service’s market power by leading the merged firm to degrade the product or

otherwise reduce its effectiveness as a cross-service tool, thus reducing competition.

•

Depriving Rivals of Scale Economies or Network Effects. Scale economies and network

effects can serve as a barrier to entry and competition. Depriving rivals of access to scale

economies and network effects can therefore entrench a dominant position. If a merger

enables a dominant firm to reduce would-be rivals’ access to additional scale or customers by

acquiring a product that affects access such as a customer acquisition channel, the merged

firm can limit the ability of rivals to improve their own products and compete more

effectively. 36 Limiting access by rivals to customers in the short run can lead to long run

entrenchment of a dominant position and tend to create monopoly power.

The Agencies’ focus here is on the artificial acquisition of network participants that occurs directly as a result of the

merger, as opposed to future network growth that may occur through competition on the merits.

36

19

For example, if two firms operate in a market in which network effects are significant but in

which rivals voluntarily interconnect, their merger can create an entity with a large enough

user base that it may have the incentive to end voluntary interconnection. Such a strategy can

lessen competition and harm trading partners by creating or entrenching dominance in this

market. This can be the case even if the merging firms did not appear to have a dominant

position prior to the merger because their interoperability practices strengthened rivals.

Eliminating a Nascent Competitive Threat. A merger may involve a dominant firm acquiring a

nascent competitive threat—namely, a firm that could grow into a significant rival, facilitate other

rivals’ growth, or otherwise lead to a reduction in its power. 37 In some cases, the nascent threat may be a

firm that provides a product or service similar to the acquiring firm that does not substantially constrain

the acquiring firm at the time of the merger but has the potential to grow into a more significant rival in

the future. In other cases, factors such as network effects, scale economies, or switching costs may make

it extremely difficult for a new entrant to offer all of the product features or services at comparable

quality and terms that an incumbent offers. The most likely successful threats in these situations can be

firms that initially avoid directly entering the dominant firm’s market, instead specializing in (a) serving

a narrow customer segment, (b) offering services that only partially overlap with those of the incumbent,

or (c) serving an overlapping customer segment with distinct products or services.

Firms with niche or only partially overlapping products or customers can grow into longer-term

threats to a dominant firm. Once established in its niche, a nascent threat may be able to add features or

serve additional customer segments, growing into greater overlap of customer segments or features over

time, thereby intensifying competition with the dominant firm. A nascent threat may also facilitate

customers aggregating additional products and services from multiple providers that serve as a partial

alternative to the incumbent’s offering. Thus, the success and independence of the nascent threat may

both provide for a direct threat of competition by the niche or nascent firm and may facilitate

competition or encourage entry by other, potentially complementary providers that may provide a partial

competitive constraint. In this way, the nascent threat supports what may be referred to as “ecosystem”

competition. In this context, ecosystem competition refers to a situation where an incumbent firm that

offers a wide array of products and services may be partially constrained by other combinations of

products and services from one or more providers, even if the business model of those competing

services is different.

Nascent threats may be particularly likely to emerge during technological transitions.

Technological transitions can render existing entry barriers less relevant, temporarily making

incumbents susceptible to competitive threats. For example, technological transitions can create

temporary opportunities for entrants to differentiate or expand their offerings based on their alignment

with new technologies, enabling them to capture network effects that otherwise insulate incumbents

from competition. A merger in this context may lessen competition by preventing or delaying any such

beneficial shift or by shaping it so that the incumbent retains its dominant position. For example, a

dominant firm might seek to acquire firms to help it reinforce or recreate entry barriers so that its

dominance endures past the technological transition. Or it might seek to acquire nascent threats that

might otherwise gain sufficient customers to overcome entry barriers. In evaluating the potential for

entrenching dominance, the Agencies take particular care to preserve opportunities for more competitive

markets to emerge during such technological shifts.

37

The Agencies assess acquisitions of nascent competitive threats by non-dominant firms under the other Guidelines.

20

Separate from and in addition to its Section 7 analysis, the Agencies will consider whether the

merger violates Section 2 of the Sherman Act. For example, under Section 2 of the Sherman Act, a firm

that may challenge a monopolist may be characterized as a “nascent threat” even if the impending threat

is uncertain and may take several years to materialize. 38 The Agencies assess whether the merger is

reasonably capable of contributing significantly to the preservation of monopoly power in violation of

Section 2, which turns on whether the acquired firm is a nascent competitive threat. 39

2.6.B. Extending a Dominant Position into Another Market

The Agencies also examine the risk that a merger could enable the merged firm to extend a

dominant position from one market into a related market, thereby substantially lessening competition or

tending to create a monopoly in the related market. For example, the merger might lead the merged firm

to leverage its position by tying, bundling, conditioning, or otherwise linking sales of two products. A

merger may also raise barriers to entry or competition in the related market, or eliminate a nascent

competitive threat, as described above. For example, prior to a merger, a related market may be

characterized by scale economies but still experience moderate levels of competition. If the merged firm

takes actions to induce customers of the dominant firm’s product to also buy the related product from

the merged firm, the merged firm may be able to gain dominance in the related market, which may be

supported by increased barriers to entry or competition that result from the merger.

These concerns can arise notwithstanding that the acquiring firm already enjoys the benefits

associated with its dominant position. The prospect of market power in the related market may strongly

affect the merged firm’s incentives in a way that does not align with the interests of its trading partners,

both in terms of strategies that create dominance for the related product and in the form of reduced

incentives to invest in its products or provide attractive terms for them after dominance is attained. In

some cases, the merger may also further entrench the firm’s original dominant position, for example if

future competition requires the provision of both products.

*

*

*

If the merger raises concerns that its effect may be to entrench or extend a dominant position,

then any claim that the merger also provides competitive benefits will be evaluated under the rebuttal

framework in Section 3. For example, the framework of Section 3 would be used to evaluate claims that

a merger would generate cost savings or quality improvements that would be passed through to make

their products more competitive or would otherwise create incentives for the merged firm to offer better

terms. The Agencies’ analysis will consider the fact that the incentives to pass through benefits to

customers or offer attractive terms are affected by competition and the extent to which entry barriers

insulate the merged firm from effective competition. It will also consider whether any claimed benefits

are specific to the merger, or whether they could be instead achieved through contracting or other

means.

United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (en banc) (per curiam).

See id. at 79 (“[I]t would be inimical to the purpose of the Sherman Act to allow monopolists free reign to squash nascent,

albeit unproven, competitors at will. . . .”).

38

39

21

2.7.

Guideline 7: When an Industry Undergoes a Trend Toward

Consolidation, the Agencies Consider Whether It Increases the Risk a

Merger May Substantially Lessen Competition or Tend to Create a

Monopoly.

The recent history and likely trajectory of an industry can be an important consideration when

assessing whether a merger presents a threat to competition. The Supreme Court has explained that “a

trend toward concentration in an industry, whatever its causes, is a highly relevant factor in deciding

how substantial the anticompetitive effect of a merger may be.” 40 It has also underscored that “Congress

intended Section 7 to arrest anticompetitive tendencies in their incipiency. 41 The Agencies therefore

examine whether a trend toward consolidation in an industry would heighten the competition concerns

identified in Guidelines 1-6.

The Agencies therefore closely examine industry consolidation trends in applying the

frameworks above. For example:

Trend Toward Concentration. If an industry has gone from having many competitors to

becoming concentrated, it may suggest greater risk of harm, for example, because new entry may be less

likely to replace or offset the lessening of competition the merger may cause. Among other implications,

in the context of a trend toward concentration, the Agencies identify a stronger presumption of harm

from undue concentration (see Guideline 1), and a greater risk of substantially lessening competition

when a merger eliminates competition between the merging parties (see Guideline 2) or increases the

risk of coordination (see Guideline 3).

Trend Toward Vertical Integration. The Agencies will generally consider evidence about the

degree of integration between firms in the relevant and related markets and whether there is a trend

toward further vertical integration. If a merger occurs amidst or furthers a trend toward vertical

integration, the Agencies consider the implications for the competitive dynamics of the industry moving

forward. For example, a trend toward vertical integration could magnify the concerns discussed in

Guideline 5 by making entry at a single level more difficult and thereby preventing the emergence of

new competitive threats over time.

Arms Race for Bargaining Leverage. The Agencies sometimes encounter mergers through

which the merging parties would, by consolidating, gain bargaining leverage over other firms that they

transact with. This can encourage those other firms to consolidate to obtain countervailing leverage,

encouraging a cascade of further consolidation. This can ultimately lead to an industry where a few

powerful firms have leverage against one another and market power over would-be entrants or over

trading partners in various parts of the value chain. For example, distributors might merge to gain

leverage against suppliers, who then merge to gain leverage against distributors, spurring a wave of

mergers that lessen competition by increasing the market power of both. This can exacerbate the

problems discussed in Guidelines 1-6, including by increasing barriers to single-level entry, encouraging

coordination, and discouraging disruptive innovation.

40

41

United States v. Pabst Brewing, 384 U.S. 546, 552-53 (1966).

Phila. Nat’l Bank, 374 U.S. at 362 (quoting Brown Shoe, 370 U.S. at 317).

22

Multiple Mergers. The Agencies sometimes see multiple mergers at once or in succession by

different players in the same industry. In such cases, the Agencies may examine multiple deals in light

of the combined trend toward concentration.

2.8.

Guideline 8: When a Merger is Part of a Series of Multiple Acquisitions,

the Agencies May Examine the Whole Series.

A firm that engages in an anticompetitive pattern or strategy of multiple acquisitions in the same

or related business lines may violate Section 7. 42 In these situations, the Agencies may evaluate the

series of acquisitions as part of an industry trend (see Guideline 7) or evaluate the overall pattern or

strategy of serial acquisitions by the acquiring firm collectively under Guidelines 1-6.

In expanding antitrust law beyond the Sherman Act through passage of the Clayton Act,

Congress intended “to permit intervention in a cumulative process when the effect of an acquisition may

be a significant reduction in the vigor of competition, even though this effect may not be so far-reaching

as to amount to a combination in restraint of trade, create a monopoly, or constitute an attempt to

monopolize.” 43 As the Supreme Court has recognized, a cumulative series of mergers can “convert an

industry from one of intense competition among many enterprises to one in which three or four large

[companies] produce the entire supply.” 44 Accordingly, the Agencies will consider individual

acquisitions in light of the cumulative effect of related patterns or business strategies.

The Agencies may examine a pattern or strategy of growth through acquisition by examining

both the firm’s history and current or future strategic incentives. Historical evidence focuses on the

strategic approach taken by the firm to acquisitions (consummated or not), both in the markets at issue

and in other markets, to reveal any overall strategic approach to serial acquisitions. Evidence of the

firm’s current incentives includes documents and testimony reflecting its plans and strategic incentives

both for the individual acquisition and for its position in the industry more broadly. Where one or both

of the merging parties has engaged in a pattern or strategy of pursuing consolidation through acquisition,

the Agencies will examine the impact of the cumulative strategy under any of the other Guidelines to

determine if that strategy may substantially lessen competition or tend to create a monopoly.

2.9.

Guideline 9: When a Merger Involves a Multi-Sided Platform, the

Agencies Examine Competition Between Platforms, on a Platform, or to

Displace a Platform.

Platforms provide different products or services to two or more different groups or “sides” who

may benefit from each other’s participation. Mergers involving platforms can threaten competition, even

when a platform merges with a firm that is neither a direct competitor nor in a traditional vertical

relationship with the platform. When evaluating a merger involving a platform, the Agencies apply

Guidelines 1-6 while accounting for market realities associated with platform competition. Specifically,

the Agencies consider competition between platforms, competition on a platform, and competition to

displace the platform.

42

Such strategies may also violate Section 2 of the Sherman Act and Section 5 of the FTC Act. Fed. Trade Comm’n, Policy

Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act, at

12-14 & nn.73 & 82 (Nov. 10, 2022) (noting that “a series of . . . acquisitions . . . that tend to bring about the harms that the

antitrust laws were designed to prevent” has been subject to liability under Section 5).

43

H.R. Rep. No. 81-1191, at 8 (1949).

44

See Brown Shoe, 370 U.S. at 334 (citing S. Rep. No. 81-1775, at 5 (1950); H.R. Rep. No. 81-1191, at 8 (1949)).

23

Multi-sided platforms generally have several attributes in common, though they can also vary in

important ways. Some of these attributes include:

•

Platforms have multiple sides. On each side of a platform, platform participants provide or

use distinct products and services. 45 Participants can provide or use different types of

products or services on each side.

•

A platform operator provides the core services that enable the platform to connect participant

groups across multiple sides. The platform operator controls other participants’ access to the

platform and can influence how interactions among platform participants play out.

•

Each side of a platform includes platform participants. Their participation might be as simple

as using the platform to find other participants, or as involved as building platform services

that enable other participants to connect in new ways and allow new participants to join the

platform.

•

Network effects occur when platform participants contribute to the value of the platform for

other participants and the operator. The value for groups of participants on one side may

depend on the number of participants either on the same side (direct network effects) or on

the other side(s) (indirect network effects). 46 Network effects can create a tendency toward

concentration in platform industries. Indirect network effects can be asymmetric and

heterogeneous; for example, one side of the market or segment of participants may place

relatively greater value on the other side(s).

•

A conflict of interest can arise when a platform operator is also a platform participant. The

Agencies refer to a “conflict of interest” as the divergence that can arise between the

operator’s incentives to operate the platform as a forum for competition and its incentive to

operate as a competitor on the platform itself. As discussed below, a conflict of interest

sometimes exacerbates competitive concerns from mergers.

Consistent with the Clayton Act’s protection of competition “in any line of commerce,” the

Agencies will seek to prohibit a merger that harms competition within a relevant market for any product

or service offered on a platform to any group of participants—i.e., around one side of the platform (see

Section 4.3). 47

The Agencies protect competition between platforms by preventing the acquisition or exclusion

of other platform operators that may substantially lessen competition or tend to create a monopoly. This

scenario can arise from various types of mergers:

For example, on 1990s operating-system platforms for personal computer (PC) software, software developers were on one

side, PC manufacturers on another, and software purchasers on another.

46

For example, 1990s PC manufacturers, software developers, and consumers all contributed to the value of the operating

system platform for one another.

47

In the limited scenario of a “special type of two-sided platform known as a ‘transaction’ platform,” under Section 1 of the

Sherman Act, a relevant market encompassing both sides of a two-sided platform may be warranted. Ohio v. American

Express Co., 138 S. Ct. 2274, 2280 (2018). This approach to Section 1 of the Sherman Act is limited to platforms with the

“key feature . . . that they cannot make a sale to one side of the platform without simultaneously making a sale to the other.”

Id. Because “they cannot sell transaction services to [either user group] individually . . . transaction platforms are better

understood as supplying only one product—transactions.” Id. at 2286. This characteristic is not present for many types of

two-sided or multi-sided platforms; in addition, many platforms offer simultaneous transactions as well as other products and

services, and further they may bundle these products with access to transact on the platform or offer quantity discounts.

45

24

A. Mergers involving two platform operators eliminate the competition between them. In a

market with a platform, entry or growth by smaller competing platforms can be particularly

challenging because of network effects. A common strategy for smaller platforms is to

specialize, providing distinctive features. Thus, dominant platforms can lessen competition

and entrench their position by systematically acquiring firms competing with one or more

sides of a multi-sided platform while they are in their infancy. The Agencies seek to stop

these trends in their incipiency.

B. A platform operator may acquire a platform participant, which can entrench the operator’s

position by depriving rivals of participants and, in turn, depriving them of network effects.

For example, acquiring a major seller on a platform may make it harder for rival platforms to

recruit buyers. The long-run benefits to a platform operator of denying network effects to

rival platforms create a powerful incentive to withhold or degrade those rivals’ access to

platform participants that the operator acquires. The more powerful the platform operator, the

greater the threat to competition presented by mergers that may weaken rival operators or

increase barriers to entry and expansion.

C. Acquisitions of firms that provide services that facilitate participation on multiple platforms

can deprive rivals of platform participants. Many services can facilitate such participation,

such as tools that help shoppers compare prices across platforms, applications that help

sellers manage listings on multiple platforms, or software that helps users switch among

platforms.

D. Mergers that involve firms that provide other important inputs to platform services can

enable the platform operator to deny rivals the benefits of those inputs. For example,

acquiring data that helps facilitate matching, sorting, or prediction services may enable the

platform to weaken rival platforms by denying them that data.

The Agencies protect competition on a platform in any markets that interact with the platform.

When a merger involves a platform operator and platform participants, the Agencies carefully examine

whether the merger would create conflicts of interest that would harm competition. A platform operator

that is also a platform participant may have a conflict of interest whereby it has an incentive to give its

own products and services an advantage over other participants competing on the platform. Platform

operators must often choose between making it easy for users to access their preferred products and

directing those users to products that instead provide greater benefit to the platform operator. Merging

with a firm that makes a product offered on the platform may change how the platform operator

balances these competing interests. For example, the platform operator may find it is more profitable to

give its own product greater prominence even if that product is inferior or is offered on worse terms after

the merger—and even if some participants leave the platform as a result. 48 This can harm competition in

the product market for the advantaged product, where the harm to competition may be experienced both

on the platform and in other channels.

48

However, few participants will leave if, for example, the switching costs are relatively high or if the advantaged product is

a small component of the overall set of services those participants access on the platform. Moreover, in the long run few

participants will leave if scale economies, network effects, or entry barriers enable the advantaged product to eventually gain

market power of its own, with rivals of the advantaged product exiting or becoming less attractive. After these dynamics play

out, the platform operator could advantage its own products without losing as many participants, as there would be fewer

alternative products available through other channels.

25

The Agencies protect competition to displace the platform or any of its services. For example,

new technologies or services may create an important opportunity for firms to replace one or more

services the incumbent platform operator provides, shifting some participants to partially or fully meet

their needs in different ways or through different channels. Similarly, a non-platform service can lessen

dependence on the platform by providing an alternative to one or more functions provided by the

platform operators. When platform owners are dominant, the Agencies seek to prevent even relatively

small accretions of power from inhibiting the prospects for displacing the platform or for decreasing

dependency on the platform.

In addition, a platform operator that advantages its own products that compete on the platform

can lessen competition between platforms and to displace the platform, as the operator may both

advantage its own product or service, and also deprive rival platforms of access to it, limiting those

rivals’ network effects.

2.10. Guideline 10: When a Merger Involves Competing Buyers, the Agencies

Examine Whether It May Substantially Lessen Competition for

Workers, Creators, Suppliers, or Other Providers.

A merger between competing buyers may harm sellers just as a merger between competing

sellers may harm buyers. 49 The same—or analogous—tools used to assess the effects of a merger of

sellers can be used to analyze the effects of a merger of buyers, including employers as buyers of labor.

Firms can compete to attract contributions from a wide variety of workers, creators, suppliers, and

service providers. The Agencies protect this competition in all its forms.

A merger of competing buyers can substantially lessen competition by eliminating the

competition between the merging buyers or by increasing coordination among the remaining buyers. It

can likewise lead to undue concentration among buyers or entrench or extend the position of a dominant

buyer. Competition among buyers can have a variety of beneficial effects analogous to competition

among sellers. For example, buyers may compete by raising the payments offered to suppliers, by

expanding supply networks, through transparent and predictable contracting, procurement, and payment

practices, or by investing in technology that reduces frictions for suppliers. In contrast, a reduction in

competition among buyers can lead to artificially suppressed input prices or purchase volume, which in

turn reduces incentives for suppliers to invest in capacity or innovation. Labor markets are important

buyer markets. The same general concerns as in other markets apply to labor markets where employers

are the buyers of labor and workers are the sellers. The Agencies will consider whether workers face a

risk that the merger may substantially lessen competition for their labor. 50 Where a merger between

employers may substantially lessen competition for workers, that reduction in labor market competition

may lower wages or slow wage growth, worsen benefits or working conditions, or result in other

degradations of workplace quality. 51 When assessing the degree to which the merging firms compete for

See, e.g., Mandeville Island Farms, Inc. v. Am. Crystal Sugar Co., 334 U.S. 219, 235-36 (1948) (“The [Sherman Act] does

not confine its protection to consumers, or to purchasers, or to competitors, or to sellers. . . . The Act is comprehensive in its

terms and coverage, protecting all who are made victims of the forbidden practices by whomever they may be perpetrated.”).

50

See, e.g., Alston, 141 S. Ct. 2141 (applying the Sherman Act to protect workers from an employer-side agreement to limit

compensation).

51

A decrease in wages is understood as relative to what would have occurred in the absence of the transaction; in many cases,

a transaction will not reduce wage levels, but rather slow wage growth. Wages encompass all aspects of pecuniary

compensation, including benefits. Job quality encompasses non-pecuniary aspects that workers value, such as working

conditions and terms of employment.

49

26

labor, evidence that a merger may have any one or more of these effects can demonstrate that substantial

competition exists between the merging firms.

Labor markets frequently have characteristics that can exacerbate the competitive effects of a

merger between competing employers. For example, labor markets often exhibit high switching costs

and search frictions due to the process of finding, applying, interviewing for, and acclimating to a new

job. Switching costs can also arise from investments specific to a type of job or a particular geographic

location. Moreover, the individual needs of workers may limit the geographical and work scope of the

jobs that are competitive substitutes.

In addition, finding a job requires the worker and the employer to agree to the match. Even

within a given salary and skill range, employers often have specific demands for the experience, skills,

availability, and other attributes they desire in their employees. At the same time, workers may seek not

only a paycheck but also work that they value in a workplace that matches their own preferences, as

different workers may value the same aspects of a job differently. This matching process often narrows

the range of rivals competing for any given employee. The level of concentration at which competition

concerns arise may be lower in labor markets than in product markets, given the unique features of

certain labor markets. In light of their characteristics, labor markets can be relatively narrow.

The features of labor markets may in some cases put firms in dominant positions. To assess this

dominance in labor markets (see Guideline 6), the Agencies often examine the merging firms’ power to

cut or freeze wages, slow wage growth, exercise increased leverage in negotiations with workers, or

generally degrade benefits and working conditions without prompting workers to quit.

If the merger may substantially lessen competition or tend to create a monopoly in upstream

markets, that loss of competition is not offset by purported benefits in a separate downstream product

market. Because the Clayton Act prohibits mergers that may substantially lessen competition or tend to

create a monopoly in any line of commerce and in any section of the country, a merger’s harm to

competition among buyers is not saved by benefits to competition among sellers. That is, a merger can

substantially lessen competition in one or more buyer markets, seller markets, or both, and the Clayton

Act protects competition in any one of them. 52 If the parties claim any benefits to competition in a

relevant buyer market, the Agencies will assess those claims using the frameworks in Section 3.

Just as they do when analyzing competition in the markets for products and services, the

Agencies will analyze labor market competition on a case-by-case basis.

2.11. Guideline 11: When an Acquisition Involves Partial Ownership or

Minority Interests, the Agencies Examine Its Impact on Competition.

In many acquisitions, two companies come under common control. In some situations, however,

the acquisition of less-than-full control may still influence decision-making at the target firm or another

firm in ways that may substantially lessen competition. Acquisitions of partial ownership or other

minority interests may give the investor rights in the target firm, such as rights to appoint board

members, observe board meetings, influence the firm’s ability to raise capital, impact operational

decisions, or access competitively sensitive information. The Agencies have concerns with both crossownership, which refers to holding a non-controlling interest in a competitor, as well as common

Often, mergers that harm competition among buyers also harm competition among sellers as a result. For example, when a

monopsonist lowers purchase prices by decreasing input purchases, they will generally decrease sales in downstream markets

as well. (See Section 4.2.D)

52

27

ownership, which occurs when individual investors hold non-controlling interests in firms that have a

competitive relationship that could be affected by those joint holdings.

Partial acquisitions that do not result in control may nevertheless present significant competitive

concerns. The acquisition of a minority position may permit influence of the target firm, implicate

strategic decisions of the acquirer with respect to its investment in other firms, or change incentives so

as to otherwise dampen competition. The post-acquisition relationship between the parties and the

independent incentives of the parties outside the acquisition may be important in determining whether

the partial acquisition may substantially lessen competition. Such partial acquisitions are subject to the

same legal standard as any other acquisition. 53

The Agencies recognize that cross-ownership and common ownership can reduce competition by

softening firms’ incentives to compete, even absent any specific anticompetitive act or intent. While the

Agencies will consider any way in which a partial acquisition may affect competition, they generally

focus on three principal effects:

First, a partial acquisition can lessen competition by giving the partial owner the ability to

influence the competitive conduct of the target firm. 54 For example, a voting interest in the target firm or

specific governance rights, such as the right to appoint members to the board of directors, influence

capital budgets, determine investment return thresholds, or select particular managers, can create such

influence. Additionally, a nonvoting interest may, in some instances, provide opportunities to prevent,

delay, or discourage important competitive initiatives, or otherwise impact competitive decision making.

Such influence can lessen competition because the partial owner could use its influence to induce the

target firm to compete less aggressively or to coordinate its conduct with that of the acquiring firm.

Second, a partial acquisition can lessen competition by reducing the incentive of the acquiring

firm to compete. 55 Acquiring a minority position in a rival might blunt the incentive of the partial owner

to compete aggressively because it may profit through dividend or other revenue share even when it

loses business to the rival. For example, the partial owner may decide not to develop a new product

feature to win market share from the firm in which it has acquired an interest, because doing so will

reduce the value of its investment in its rival. This reduction in the incentive of the acquiring firm to

compete arises even when it cannot directly influence the conduct or decision making of the target firm.

Third, a partial acquisition can lessen competition by giving the acquiring firm access to nonpublic, competitively sensitive information from the target firm. Even absent any ability to influence the

conduct of the target firm, access to competitively sensitive information can substantially lessen

competition through other mechanisms. For example, it can enhance the ability of the target and the

partial owner to coordinate their behavior and make other accommodating responses faster and more

targeted. The risk of coordinated effects is greater if the transaction also facilitates the flow of

competitively sensitive information from the investor to the target firm. Even if coordination does not

occur, the partial owner may use that information to preempt or appropriate a rival’s competitive

business strategies for its own benefit. If rivals know their efforts to win trading partners can be

See United States v. E. I. du Pont de Nemours & Co., 353 U.S. 586, 592 (1957) (“[A]ny acquisition by one corporation of

all or any part of the stock of another corporation, competitor or not, is within the reach of [Section 7 of the Clayton Act]

whenever the reasonable likelihood appears that the acquisition will result in a restraint of commerce or in the creation of a

monopoly of any line of commerce.”).

54

See United States v. Dairy Farmers of Am., Inc., 426 F.3d 850, 860-61 (6th Cir. 2005).

55

See Denver & Rio Grande v. United States, 387 U.S. 485, 504 (1967) (identifying Section 7 concerns with a 20%

investment).

53

28

immediately appropriated, they may see less value in taking competitive actions in the first place,

resulting in a lessening of competition.

*

*

*

The analyses above address common scenarios that the Agencies use to assess the risk that a

merger may substantially lessen competition or tend to create a monopoly. However, they are not

exhaustive. The Agencies have in the past encountered mergers that lessen competition through

mechanisms not covered above. For example:

A. A merger that would enable firms to avoid a regulatory constraint because that constraint was

applicable to only one of the merging firms;

B. A merger that would enable firms to exploit a unique procurement process that favors the

bids of a particular competitor who would be acquired in the merger; or

C. In a concentrated market, a merger that would dampen the acquired firm’s incentive or

ability to compete due to the structure of the acquisition or the acquirer.

As these scenarios and these Guidelines indicate, a wide range of evidence can show that a

merger may lessen competition or tend to create a monopoly. Whatever the sources of evidence, the

Agencies look to the facts and the law in each case.

Whatever frameworks the Agencies use to identify that a merger may substantially lessen

competition or tend to create a monopoly, they also examine rebuttal evidence under the framework in

Section 3.

29

3. Rebuttal Evidence Showing that No Substantial Lessening of

Competition is Threatened by the Merger

The Agencies may assess whether a merger may substantially lessen competition or tend to

create a monopoly based on a fact-specific analysis under any one or more of the Guidelines discussed

above. 56 The Supreme Court has determined that analysis should consider “other pertinent factors” that

may “mandate[] a conclusion that no substantial lessening of competition [is] threatened by the

acquisition.” 57 The factors pertinent to rebuttal depend on the nature of the threat to competition or

tendency to create a monopoly resulting from the merger.

Several common types of rebuttal and defense evidence are subject to legal tests established by

the courts. The Agencies apply those tests consistent with prevailing law, as described below.

3.1.

Failing Firms

When merging parties suggest the weak or weakening financial position of one of the merging

parties will prevent a lessening of competition, the Agencies examine that evidence under the “failing

firm” defense established by the Supreme Court. This defense applies when the assets to be acquired

would imminently cease playing a competitive role in the market even absent the merger.

As set forth by the Supreme Court, the failing firm defense has three requirements:

A. “[T]he evidence show[s] that the [failing firm] face[s] the grave probability of a business

failure.” 58 The Agencies typically look for evidence in support of this element that the

allegedly failing firm would be unable to meet its financial obligations in the near future.

Declining sales and/or net losses, standing alone, are insufficient to show this requirement.

B. “The prospects of reorganization of [the failing firm are] dim or nonexistent.” 59 The

Agencies typically look for evidence suggesting that the failing firm would be unable to

reorganize successfully under Chapter 11 of the Bankruptcy Act, taking into account that

“companies reorganized through receivership, or through [the Bankruptcy Act] often

emerge[] as strong competitive companies.” 60 Evidence of the firm’s actual attempts to

resolve its debt with creditors is important.

C. “[T]he company that acquires the failing [firm] or brings it under dominion is the only

available purchaser.” 61 The Agencies typically look for evidence that a company has made

unsuccessful good-faith efforts to elicit reasonable alternative offers that pose a less severe

danger to competition than does the proposed merger. 62

See United States v. AT&T, Inc., 916 F.3d at 1032.

See United States v. Gen. Dynamics Corp., 415 U.S. 486, 498 (1974); Baker Hughes, 908 F.2d at 990 (quoting General

Dynamics and describing its holding as permitting rebuttal based on a “finding that ‘no substantial lessening of competition

occurred or was threatened by the acquisition’”).

58

Citizen Publ’g Co. v. United States, 394 U.S. 131, 138 (1969).

59

Id.

60

Id.

61

Id. at 136-39 (quoting Int’l Shoe Co. v. FTC, 280 U.S. 291, 302 (1930)).

62

Any offer to purchase the assets of the failing firm for a price above the liquidation value of those assets will be regarded as

a reasonable alternative offer. Parties must solicit reasonable alternative offers before claiming that the business is failing.

56

57

30

Although merging parties sometimes argue that a poor or weakening position should serve as a

defense even when it does not meet these elements, the Supreme Court has “confine[d] the failing

company doctrine to its present narrow scope.” 63 The Agencies evaluate evidence of a failing firm

consistent with this prevailing law. 64

3.2.

Entry and Repositioning

Merging parties sometimes raise a rebuttal argument that a reduction in competition resulting

from the merger would induce entry or repositioning 65 into the relevant market, preventing the merger

from substantially lessening competition or tending to create a monopoly in the first place. This

argument posits that a merger may, by substantially lessening competition, make the market more

profitable for the merged firm and any remaining competitors, and that this increased profitability may

induce new entry. To evaluate this rebuttal evidence, the Agencies assess whether entry induced by the

merger would be “timely, likely, and sufficient in its magnitude, character, and scope to deter or

counteract the competitive effects of concern.” 66

Timeliness. To show that no substantial lessening of competition is threatened by a merger, entry

must be rapid enough to replace lost competition before any effect from the loss of competition due to

the merger may occur. Entry in most industries takes a significant amount of time and is therefore

insufficient to counteract any substantial lessening of competition that is threatened by a merger.

Moreover, the entry must be durable: an entrant that does not plan to sustain its investment or that may

exit the market would not ensure long-term preservation of competition.

Likelihood. Entry induced by lost competition must be so likely that no substantial lessening of

competition is threatened by the merger. Firms make entry decisions based on the market conditions

they expect once they participate in the market. If the new entry is sufficient to counteract the merger’s

effect on competition, the Agencies analyze why the merger would induce entry that was not planned in

pre-merger competitive conditions.

The Agencies also assess whether the merger may increase entry barriers. For example, the

merging firms may have a greater ability to discourage or block new entry when combined than they

would have as separate firms. Mergers may enable or incentivize unilateral or coordinated exclusionary

Liquidation value is the highest value the assets could command outside the market. If a reasonable alternative offer was

rejected, the parties cannot claim that the business is failing.

63

Citizen Publ’g, 394 U.S. at 139.

64

The Agencies do not normally credit claims that the assets of a division would exit the relevant market in the near future

unless: (1) applying cost allocation rules that reflect true economic costs, the division has a persistently negative cash flow on

an operating basis, and such negative cash flow is not economically justified for the firm by benefits such as added sales in

complementary markets or enhanced customer goodwill; and (2) the owner of the failing division has made unsuccessful

good-faith efforts to elicit reasonable alternative offers that would keep its assets in the relevant market and pose a less severe

danger to competition than does the proposed acquisition. Because firms can allocate costs, revenues, and intra-company

transactions among their subsidiaries and divisions, the Agencies require evidence that is not solely based on management

plans that could have been prepared for the purpose of demonstrating negative cash flow or the prospect of exit from the

relevant market.

65

Repositioning is a supply-side response that is evaluated like entry. If repositioning requires movement of assets from other

markets, the Agencies will consider the costs and competitive effects of doing so. Repositioning that would reduce

competition in the markets from which products or services are moved is not a cognizable rebuttal for a lessening of

competition in the relevant market.

66

FTC v. Sanford Health, 926 F.3d 959, 965 (8th Cir. 2019).

31

strategies that make entry more difficult. Entry can be particularly challenging when a firm must enter at

multiple levels of the market at sufficient scale to compete effectively.

Sufficiency. Even where timely and likely, the prospect of entry may not effectively prevent a

merger from threatening a substantial lessening of competition. Entry may be insufficient due to a wide

variety of constraints that limit an entrant’s effectiveness as a competitor. Entry must at least replicate

the scale, strength, and durability of one of the merging parties to be considered sufficient. The Agencies

typically do not credit entry that depends on lessening competition in other markets.

As part of their analysis, the Agencies will consider the economic realities at play. For example,

lack of successful entry in the past will likely suggest that entry may be slow or difficult. Recent

examples of entry, whether successful or unsuccessful, provide the starting point for identifying the

elements of practical entry barriers and the features of the industry that facilitate or interfere with entry.

The Agencies will also consider whether the parties’ entry arguments are consistent with the rationale

for the merger or imply that the merger itself would be unprofitable.

3.3.

Procompetitive Efficiencies

The Supreme Court has held that “possible economies [from a merger] cannot be used as a

defense to illegality.” 67 Competition usually spurs firms to achieve efficiencies internally, and firms also

often work together using contracts short of a merger to combine complementary assets without the full

anticompetitive consequences of a merger.

Merging parties sometimes raise a rebuttal argument that, notwithstanding other evidence that

competition may be lessened, evidence of procompetitive efficiencies shows that no substantial

lessening of competition is in fact threatened by the merger. This argument asserts that the merger

would not substantially lessen competition in any relevant market in the first place. 68 When assessing

this argument, the Agencies will not credit vague or speculative claims, nor will they credit benefits

outside the relevant market that would not prevent a lessening of competition in the relevant market.

Rather, the Agencies examine whether the evidence 69 presented by the merging parties shows each of

the following:

Merger Specificity. The merger will produce substantial competitive benefits that could not be

achieved without the merger under review. 70 Alternative ways of achieving the claimed benefits are

considered in making this determination. Alternative arrangements could include organic growth of one

of the merging firms, contracts between them, mergers with others, or a partial merger involving only

those assets that give rise to the procompetitive efficiencies.

Phila. Nat’l Bank, 374 U.S. at 371; Procter & Gamble Co., 386 U.S. at 580 (“Congress was aware that some mergers

which lessen competition may also result in economies but it struck the balance in favor of protecting competition.”).

68

United States v. Anthem, 855 F.3d 345, 353-55 (D.C. Cir. 2017) (although efficiencies not a “defense” to antitrust liability,

evidence sometimes used “to rebut a prima facie case”); Saint Alphonsus Medical Center-Nampa, 778 F.3d at 791 (“The

Clayton Act focuses on competition, and the claimed efficiencies therefore must show that the prediction of anticompetitive

effects from the prima facie case is inaccurate.”).

69

In general, evidence related to efficiencies developed prior to the merger challenge is much more probative than evidence

developed during the Agencies’ investigation or litigation.

70

If inter-firm collaborations are achievable by contract, they are not merger specific. The Agencies will credit the merger

specificity of efficiencies only in the presence of evidence that a contract to achieve the asserted efficiencies would not be

practical. See Anthem, 855 F.3d at 357.

67

32

Verifiability. These benefits are verifiable, and have been verified, using reliable methodology

and evidence not dependent on the subjective predictions of the merging parties or their agents.

Procompetitive efficiencies are often speculative and difficult to verify and quantify, and efficiencies

projected by the merging firms often are not realized. If reliable methodology for verifying efficiencies

does not exist or is otherwise not presented by the merging parties, the Agencies are unable to credit

those efficiencies.

Prevents a Reduction in Competition. To the extent efficiencies merely benefit the merging

firms, they are not cognizable. The merging parties must demonstrate through credible evidence that,

within a short period of time, the benefits will prevent the risk of a substantial lessening of competition

in the relevant market.

Not Anticompetitive. Any benefits claimed by the merging parties are cognizable only if they do

not result from the anticompetitive worsening of terms for the merged firm’s trading partners. 71

Procompetitive efficiencies that satisfy each of these criteria are called cognizable efficiencies.

To successfully rebut evidence that a merger may substantially lessen competition, cognizable

efficiencies must be of a nature, magnitude, and likelihood that no substantial lessening of competition

is threatened by the merger in any relevant market. Cognizable efficiencies that would not prevent the

creation of a monopoly cannot justify a merger that may tend to create a monopoly.

The Agencies will not credit efficiencies if they reflect or require a decrease in competition in a separate market. For

example, if input costs are expected to decrease, the cost savings will not be treated as an efficiency if they reflect an increase

in monopsony power.

71

33

4. Analytical, Economic, and Evidentiary Tools

The analytical, economic, and evidentiary tools that follow can be applicable to many parts of

the Agencies’ evaluation of a merger as they apply the factors and frameworks discussed in Sections 2

and 3.

4.1.

Sources of Evidence

This subsection describes the most common sources of evidence the Agencies draw on in a

merger investigation. The evidence the Agencies rely upon to evaluate whether a merger may

substantially lessen competition or tend to create a monopoly is weighed based on its probative value. In

assessing the available evidence, the Agencies consider documents, testimony, available data, and

analysis of those data, including credible econometric analysis and economic modeling.

Merging Parties. The Agencies often obtain substantial information from the merging parties,

including documents, testimony, and data. Across all of these categories, evidence created in the normal

course of business is more probative than evidence created after the company began anticipating a

merger review. Similarly, the Agencies give less weight to predictions by the parties or their employees,

whether in the ordinary course of business or in anticipation of litigation, offered to allay competition

concerns. Where the testimony of outcome-interested merging party employees contradicts ordinary

course business records, the Agencies typically give greater weight to the business records.

Evidence that the merging parties intend or expect the merger to lessen competition, such as

plans to coordinate with other firms, raise prices, reduce output or capacity, reduce product quality or

variety, lower wages, cut benefits, exit a market, cancel plans to enter a market without a merger,

withdraw products or delay their introduction, or curtail research and development efforts after the

merger, can be highly informative in evaluating the effects of a merger on competition. The Agencies

give little weight, however, to the lack of such evidence or the expressed contrary intent of the merging

parties.

Customers, Workers, Industry Participants, and Observers. Customers can provide a variety of

information to the Agencies, ranging from information about their own purchasing behavior and choices

to their views about the effects of the merger itself. The Agencies consider the relationship between

customers and the merging parties in weighing customer evidence. The ongoing business relationship

between a customer and a merging party may discourage the customer from providing evidence

inconsistent with the interests of the merging parties.

Workers and representatives from labor organizations can provide information regarding, among

other things, wages, non-wage compensation, working conditions, the individualized needs of workers

in the market in question, the frictions involved in changing jobs, and the industry in which they work.

Similarly, other suppliers, indirect customers, distributors, consultants, and industry analysts can

also provide information helpful to a merger inquiry. As with other interested parties, the Agencies give

less weight to evidence created in anticipation of a merger investigation and more weight to evidence

developed in the ordinary course of business.

Market Effects in Consummated Mergers. Evidence of observed post-merger price increases or

worsened terms is given substantial weight. A consummated merger, however, may substantially lessen

competition even if such effects have not yet been observed, perhaps because the merged firm may be

aware of the possibility of post-merger antitrust review and is therefore moderating its conduct.

34

Consequently, in evaluating consummated mergers, the Agencies also consider the same types of

evidence when evaluating proposed mergers.

Econometric Analysis and Economic Modeling. Econometric analysis of data and other types of

economic modeling can be informative in evaluating the potential effects of a merger on competition.

The Agencies give more weight to analysis using high quality data and adhering to rigorous standards.

But the Agencies also take into account that in some cases, the availability or quality of data or reliable

modeling techniques might limit the availability and relevance of econometric modeling. When data is

available, the Agencies recognize that the goal of economic modeling is not to create a perfect

representation of reality, but rather to inform an assessment of the likely change in firm incentives

resulting from a merger.

Transaction Terms. The financial terms of the transaction may also be informative regarding a

merger’s impact on competition. For example, a purchase price that exceeds the acquired firm’s standalone market value can sometimes indicate that the acquiring firm is paying a premium because it

expects to be able to benefit from reduced competition.

4.2.

Evaluating Competition Among Firms

This subsection discusses evidence and tools the Agencies look to when assessing competition

among firms. The evidence and tools in this section can be relevant to a variety of settings, for example:

to assess competition between rival firms (Guideline 2); the ability and incentive to limit access to a

product rivals use to compete (Guideline 5); or for market definition (Section 4.3), for example when

carrying out the Hypothetical Monopolist Test (Section 4.3.A).

For clarity, the discussion in this subsection often focuses on competition between two suppliers

of substitute products that set prices. Analogous analytic tools may also be relevant in more general

settings, for example when considering: competition among more than two suppliers; competition

among buyers or employers to procure inputs and labor; competition that derives from customer

willingness to buy in different locations; and competition that takes place in dimensions other than price

or when terms are determined through, for example, negotiations or auctions.

Guideline 2 describes how different types of evidence can be used in assessing the potential

harm to competition from a merger; some portions of Guideline 2 that are relevant in other settings are

repeated below.

4.2.A. Generally Applicable Considerations

The Agencies may consider one or more of the following types of evidence, tools, and metrics

when assessing the degree of competition among firms:

Strategic Deliberations or Decisions. The Agencies may analyze the extent of competition

among firms, for example between the merging firms, by examining evidence of their strategic

deliberations or decisions in the regular course of business. For example, in some markets, the firms

may monitor each other’s pricing, marketing campaigns, facility locations, improvements, products,

capacity, output, input costs, and/or innovation plans. This can provide evidence of competition between

the merging firms, especially when they react by taking steps to preserve or enhance the competitiveness

or profitability of their own products or services.

35

Prior Merger, Entry, and Exit Events. The Agencies may look to historical events to assess the

presence and substantiality of direct competition between the merging firms. For example, the Agencies

may examine the impact of recent relevant mergers, entry, expansion, or exit events on the merging

parties or their competitive behavior.

Customer Substitution. Customers’ willingness to switch between different firms’ products is an

important part of the competitive process. Firms are closer competitors the more that customers are

willing to switch between their products, for example because they are more similar in quality, price, or

other characteristics.

Evidence commonly analyzed to show the extent of substitution among firms’ products includes:

how customers have shifted purchases in the past in response to relative changes in price or other terms

and conditions; documentary and testimonial evidence such as win/loss reports, evidence from discount

approval processes, switching data, customer surveys, as well as information from suppliers of

complementary products and distributors; objective information about product characteristics; and

market realities affecting the ability of customers to switch.

Impact of Competitive Actions on Rivals. When one firm takes competitive actions to attract

customers, this can benefit the firm at the expense of its rivals. The Agencies may gauge the extent of

competition among firms by considering the impact that competitive actions by one firm have on the

others. The impact of a firm’s competitive actions on a rival generally depends on how many sales a

rival would lose as a result of the competitive actions, as well as the profitability of those lost sales. The

Agencies may use margins to measure the profitability of the sale a rival would have made. 72

Impact of Eliminating Competition Between the Firms. In some instances, evidence may be

available to assess the impact of competition from one or more firms on the other firms’ actions, such as

firm choices about price, quality, wages, or another dimension of competition. This can be gauged by

comparing the two firms’ actions when they compete and make strategic choices independently against

the actions the firms might choose if they acted jointly. Actual or predicted changes in these results of

competition, when available, can indicate the degree of competition between the firms.

To make this type of comparison, the Agencies sometimes rely on economic models. Often, such

models consider the firms’ incentives to change their actions in one or more selected dimensions, such

as price, in a somewhat simplified scenario. For example, a model might focus on the firms’ short-run

incentives to change price, while abstracting from a variety of additional competitive forces and

dimensions of competition, such as the potential for firms to reposition their products or for the merging

firms to coordinate with other firms. Such a model may incorporate data and evidence in order to

produce quantitative estimates of the impact of the merger on firm incentives and corresponding

choices. This type of exercise is sometimes referred to by economists as “merger simulation” despite the

fact that the hypothetical setting considers only selected aspects of the loss of competition from a

merger. The Agencies use such models to give an indication of the scale and importance of competition,

not to precisely predict outcomes.

The margin on incremental units is the difference between incremental revenue (often equal to price) and incremental cost

on those units. The Agencies may use accounting data to measure incremental costs, but they do not necessarily rely on

accounting margins recorded by firms in the ordinary course of business because such margins often do not align with the

concept of incremental cost that is relevant in economic analysis of a merger.

72

36

4.2.B. Considerations When Terms Are Set by Firms

The Agencies may use various types of evidence and metrics to assess the strength of

competition among firms that set terms to their customers. Firms might offer the same terms to different

customers or different terms to different groups of customers.

Competition in this setting can lead firms to set lower prices or offer more attractive terms when

they act independently than they would in a setting where that competition was eliminated by a merger.

When considering the impact of competition on the incentives to set price, to the extent price increases

on one firm’s products would lead customers to switch to products from another firm, their merger will

enable the merged firm to profit by unilaterally raising the price of one or both products above the premerger level. Some of the sales lost because of the price increase will be diverted to the products of the

other firm, and capturing the value of these diverted sales can make the price increase profitable even

though it would not have been profitable prior to the merger.

A measure of customer substitution between firms in this setting is the diversion ratio. The

diversion ratio from one product to another is a metric of how customers likely would substitute between

them. The diversion ratio is the fraction of unit sales lost by the first product due to a change in terms,

such as an increase in its price, that would be diverted to the second product. The higher the diversion

ratio between two products made by different firms, the stronger the competition between them.

A high diversion ratio between the products owned by two firms can indicate strong competition

between them even if the diversion ratio to another firm is higher. The diversion ratio from one of the

products of one firm to a group of products made by other firms, defined analogously, is sometimes

referred to as the aggregate diversion ratio or the recapture rate.

A measure of the impact on rivals of competitive actions is the value of diverted sales from a

price increase. The value of sales diverted from one firm to a second firm, when the first firm raises its

price on one of its products, is equal to the number of units that would be diverted from the first firm to

the second, multiplied by the difference between the second firm’s price and the incremental cost of the

diverted sales. To interpret the magnitude of the value of diverted sales, the Agencies may use as a basis

of comparison either the incremental cost to the second firm of making the diverted sales, or the

revenues lost by the first firm as a result of the price increase. The ratio of the value of diverted sales to

the revenues lost by the first firm can be an indicator of the upward pricing pressure that would result

from the loss of competition between the two firms. Analogous concepts can be applied to analyze the

impact on rivals of worsening terms other than price.

4.2.C. Considerations When Terms Are Set Through Bargaining or Auctions

In some industries, buyers and sellers negotiate prices and other terms of trade. In bargaining,

buyers commonly negotiate with more than one seller and may play competing sellers off against one

another. In other industries, sellers might sell their products, or buyers might procure inputs, using an

auction. Negotiations may involve aspects of an auction as well as aspects of one-on-one negotiation.

Competition among sellers can significantly enhance the ability of a buyer to obtain a result more

favorable to it, and less favorable to the sellers, compared to a situation where the elimination of

competition through a merger prevents buyers from playing those sellers off against each other in

negotiations.

Sellers may compete even when a customer does not directly play their offers against each other.

The attractiveness of alternative options influences the importance of reaching an agreement to the

37

negotiating parties and thus the terms of the agreement. A party that has many attractive alternative

trading partners places less importance on reaching an agreement with any one particular trading partner

than a party with few attractive alternatives. As alternatives for one party are eliminated (such as

through a merger), the trading partner gains additional bargaining leverage reflecting that loss of

competition. A merger between sellers may lessen competition even if the merged firm handles

negotiations for the merging firms’ products separately.

Thus, qualitative or quantitative evidence about the leverage provided to buyers by competing

suppliers may be used to assess the extent of competition among firms in this setting. Analogous

evidence may be used when analyzing a setting where terms are set using auctions, for example,

procurement auctions where suppliers bid to serve a buyer. If, for some categories of procurements,

certain suppliers are often among the most attractive to the buyer, competition among that group of

suppliers is likely to be strong.

Firms sometimes keep records of the progress and outcome of individual sales efforts, and the

Agencies may use these data to generate measures of the extent to which customers would likely

substitute between the two firms. Examples of such measures might include a diversion ratio based on

the rate at which customers would buy from one firm if the other one was not available, or the frequency

with which the two firms bid on contracts with the same customer.

4.2.D. Considerations When Firms Determine Capacity and Output

In some markets, the choice of how much to produce (output decisions) or how much productive

capacity to maintain (capacity decisions) are key strategic variables. When a firm decreases output, it

may lose sales to rivals, but also drive up prices. Because a merged firm will account for the impact of

higher prices across all of the merged firms’ sales, it may have an incentive to decrease output as a result

of the merger. The loss of competition through a merger of two firms may lead the merged firm to leave

capacity idle, refrain from building or obtaining capacity that would have been obtained absent the

merger, lay off or stop hiring workers, or eliminate pre-existing production capabilities. A firm may also

divert the use of capacity away from one relevant market and into another market so as to raise the price

in the former market. The analysis of the extent to which firms compete may differ depending on how a

merger between them might create incentives to suppress output.

Competition between merging firms is greater when (1) the merging firms’ market shares are

relatively high; (2) the merging firms’ products are relatively undifferentiated from each other; (3) the

market elasticity of demand is relatively low; (4) the margin on the suppressed output is relatively low;

and (5) the supply responses of non-merging rivals are relatively small. Qualitative or quantitative

evidence may be used to evaluate and weigh each of these factors.

In some cases, competition between firms—including one firm with a substantial share of the

sales in the market and another with significant excess capacity to serve that market—can prevent an

output suppression strategy from being profitable. This can occur even if the firm with the excess

capacity has a relatively small share of sales, as long as that firm’s ability to expand, and thus keep

prices from rising, makes an output suppression strategy unprofitable for the firm with the larger market

share.

Output or capacity reductions also may affect the market’s resilience in the face of future shocks

to supply or demand, and the Agencies will consider this loss of resilience in assessing whether the

merger may substantially lessen competition or tend to create a monopoly.

38

4.2.E. Considerations for Innovation and Product Variety Competition

Firms can compete for customers by offering varied and innovative products and features, which

could range from minor improvements to the introduction of a new product category. Features can

include new or different product attributes, services offered along with a product, or higher-quality

services standing alone. Customers value the variety of products or services that competition generates,

including having a variety of locations at which they can shop.

Offering the best mix of products and features is an important dimension of competition that may

be harmed as a result of the elimination of competition between the merging parties.

When a firm introduces a new product or improves a product’s features, some of the sales it

gains may be at the expense of its rivals, including rivals that are competing to develop similar products

and features. As a result, competition between firms may lead them to make greater efforts to offer a

variety of products and features than would be the case if the firms were jointly owned, for example, if

they merged. The merged firm may have a reduced incentive to continue or initiate development of new

products that would have competed with the other merging party, but post-merger would “cannibalize”

what would be its own sales. 73 A service provider may have a reduced incentive to continue valuable

upgrades offered by the acquired firm. The merged firm may have a reduced incentive to engage in

disruptive innovation that would threaten the business of one of the merging firms. Or it may have the

incentive to change its product mix, such as by ceasing to offer one of the merging firms’ products,

leaving worse off the customers who previously chose the product that was eliminated. For example,

competition may be harmed when customers with a preference for a low-price option lose access to it,

even if remaining products have higher quality.

The incentives to compete aggressively on innovation and product variety depend on the

capabilities of the firms and on customer reactions to the new offerings. Development of new features

depends on having the appropriate expertise and resources. Where firms are two of a small number of

companies with specialized employees, development facilities, intellectual property, or research projects

in a particular area, competition between them will have a greater impact on their incentives to innovate.

Innovation may be directed at outcomes beyond product features; for example, innovation may

be directed at reducing costs or adopting new technology for the distribution of products.

4.3.

Market Definition

The Clayton Act protects competition “in any line of commerce in any section of the country.” 74

The Agencies engage in a market definition inquiry in order to identify whether there is any line of

commerce or section of the country in which the merger may substantially lessen competition or tend to

create a monopoly. The Agencies identify the “area of effective competition” in which competition may

be lessened “with reference to a product market (the ‘line of commerce’) and a geographic market (the

‘section of the country.’).” 75 The Agencies refer to the process of identifying market(s) protected by the

Clayton Act as a “market definition” exercise and the markets so defined as “relevant antitrust markets,”

Sales “cannibalization” refers to a situation where customers of a firm substitute away from one of the firm’s products to

another product offered by the same firm.

74

15 U.S.C. § 18.

75

Brown Shoe, 370 U.S. at 324.

73

39

or simply “relevant markets.” Market definition can also allow the Agencies to identify market

participants and measure market shares and market concentration.

A relevant antitrust market is an area of effective competition, comprising both product (or

service) and geographic elements. The outer boundaries of a relevant product market are determined by

the “reasonable interchangeability of use or the cross-elasticity of demand between the product itself and

substitutes for it.” 76 Within a broad relevant market, however, effective competition often occurs in

numerous narrower relevant markets. 77 Market definition ensures that relevant antitrust markets are

sufficiently broad, but it does not always lead to a single relevant market. Section 7 of the Clayton Act

prohibits any merger that may substantially lessen competition “in any line of commerce” and in “any

section of the country,” and the Agencies protect competition by challenging a merger that may lessen

competition in any one or more relevant markets.

Market participants often encounter a range of possible substitutes for the products of the

merging firms. However, a relevant market cannot meaningfully encompass that infinite range of

substitutes. 78 There may be effective competition among a narrow group of products, and the loss of that

competition may be harmful, making the narrow group a relevant market, even if competitive constraints

from significant substitutes are outside the group. The loss of both the competition between the narrow

group of products and the significant substitutes outside that group may be even more harmful, but that

does not prevent the narrow group from being a market in its own right.

Relevant markets need not have precise metes and bounds. Some substitutes may be closer, and

others more distant, and defining a market necessarily requires including some substitutes and excluding

others. Defining a relevant market sometimes requires a line-drawing exercise around product features,

such as size, quality, distances, customer segment, or prices. There can be many places to draw that line

and properly define a relevant market. The Agencies recognize that such scenarios are common, and

indeed “fuzziness would seem inherent in any attempt to delineate the relevant . . . market.” 79 Market

participants may use the term “market” colloquially to refer to a broader or different set of products than

those that would be needed to constitute a valid relevant antitrust market.

The Agencies rely on several tools to demonstrate that a market is a relevant antitrust market.

For example, the Agencies may rely on any one or more of the following to identify a relevant antitrust

market.

A. Direct evidence of substantial competition between the merging parties can demonstrate that

a relevant market exists in which the merger may substantially lessen competition and can be

sufficient to identify the line of commerce and section of the country affected by a merger,

even if the metes and bounds of the market are only broadly characterized.

Id. at 325.

Id. (“[W]ithin [a] broad market, well-defined submarkets may exist which, in themselves, constitute product markets for

antitrust purposes.”). Multiple overlapping markets can be appropriately defined relevant markets. For example, a merger to

monopoly for food worldwide would lessen competition in well-defined relevant markets for, among others, food, baked

goods, cookies, low-fat cookies, and premium low-fat chocolate chip cookies. Illegality in any of these in any city or town

comprising a relevant geographic market would suffice to prohibit the merger, and the fact that one area comprises a relevant

market does not mean a larger, smaller, or overlapping area could not as well.

78

United States v. Cont’l Can Co., 378 U.S. 441, 449 (1964); see also FTC v. Advoc. Health Care Network, 841 F.3d 460,

469 (7th Cir. 2016) (“A geographic market does not need to include all of the firm’s competitors; it needs to include the

competitors that would substantially constrain the firm’s price-increasing ability.” (cleaned up)).

79

Phila. Nat’l Bank, 374 U.S. at 360 n.37.

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B. Direct evidence of the exercise of market power can demonstrate the existence of a relevant

market in which that power exists. This evidence can be valuable when assessing the risk that

a dominant position may be entrenched, maintained, or extended, since the same evidence

identifies market power and can be sufficient to identify the line of commerce and section of

the country affected by a merger, even if the metes and bounds of the market are only

broadly characterized.

C. A relevant market can be identified from evidence on observed market characteristics

(“practical indicia”), such as industry or public recognition of the submarket as a separate

economic entity, the product’s peculiar characteristics and uses, unique production facilities,

distinct customers, distinct prices, sensitivity to price changes, and specialized vendors. 80

Various practical indicia may identify a relevant market in different settings.

D. Another common method employed by courts and the Agencies is the hypothetical

monopolist test. 81 This test examines whether a proposed market is too narrow by asking

whether a hypothetical monopolist over this market could profitably worsen terms

significantly, for example, by raising price. An analogous hypothetical monopsonist test

applies when considering the impact of a merger on competition among buyers.

The Agencies use these tools to define relevant markets because they each leverage market

realities to identify an area of effective competition.

Section 4.3.A below describes the Hypothetical Monopolist Test in greater detail. Section 4.3.B

addresses issues that may arise when defining relevant markets in several specific scenarios.

4.3.A. The Hypothetical Monopolist Test

This Section describes the Hypothetical Monopolist Test, which is a method by which the

Agencies often define relevant antitrust markets. As outlined above, a relevant antitrust market is an area

of effective competition. The Hypothetical Monopolist/Monopsonist Test (“HMT”) evaluates whether a

group of products is sufficiently broad to constitute a relevant antitrust market. To do so, the HMT asks

whether eliminating the competition among the group of products by combining them under the control

of a hypothetical monopolist likely would lead to a worsening of terms for customers. The Agencies

generally focus their assessment on the constraints from competition, rather than on constraints from

regulation, entry, or other market changes. The Agencies are concerned with the impact on economic

incentives and assume the hypothetical monopolist would seek to maximize profits.

When evaluating a merger of sellers, the HMT asks whether a hypothetical profit-maximizing

firm, not prevented by regulation from worsening terms, that was the only present and future seller of a

group of products (“hypothetical monopolist”) likely would undertake at least a small but significant and

non-transitory increase in price (“SSNIP”) or other worsening of terms (“SSNIPT”) for at least one

Brown Shoe, 370 U.S. at 325, quoted in United States v. U.S. Sugar Corp., 73 F.4th 197, 204-07 (3d Cir. 2023) (affirming

district court’s application of Brown Shoe practical indicia to evaluate relevant product market that included, based on the

unique facts of the industry, those distributors who “could counteract monopolistic restrictions by releasing their own

supplies”).

81

See FTC v. Penn State Hershey Med. Center, 838 F.3d 327, 338 (3d Cir. 2016). While these guidelines focus on applying

the hypothetical monopolist test in analyzing mergers, the test can be adapted for similar purposes in cases involving alleged

monopolization or other conduct. See, e.g., McWane, Inc. v. FTC, 783 F.3d 814, 829-30 (11th Cir. 2015).

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product in the group. 82 For the purpose of analyzing this issue, the terms of sale of products outside the

candidate market are held constant. Analogously, when considering a merger of buyers, the Agencies

ask the equivalent question for a hypothetical monopsonist. This Section often focuses on merging

sellers to simplify exposition.

4.3.B. Implementing the Hypothetical Monopolist Test

The SSNIPT. A SSNIPT may entail worsening terms along any dimension of competition,

including price (SSNIP), but also other terms (broadly defined) such as quality, service, capacity

investment, choice of product variety or features, or innovative effort.

Input and Labor Markets. When the competition at issue involves firms buying inputs or

employing labor, the HMT considers whether the hypothetical monopsonist would undertake at least a

SSNIPT, such as a decrease in the offered price or a worsening of the terms of trade offered to suppliers,

or a decrease in the wage offered to workers or a worsening of their working conditions or benefits.

The Geographic Dimension of the Market. The hypothetical monopolist test is generally

applied to a group of products together with a geographic region to determine a relevant market, though

for ease of exposition the two dimensions are discussed separately, with geographic market definition

discussed in Section 4.3.D.2.

Negotiations or Auctions. The HMT is stated in terms of a hypothetical monopolist undertaking

a SSNIPT. This covers settings where the hypothetical monopolist sets terms and makes them worse. It

also covers settings where firms bargain, and the hypothetical monopolist would have a stronger

bargaining position that would likely lead it to extract a SSNIPT during negotiations, or where firms sell

their products in an auction, and the bids submitted by the hypothetical monopolist would result in the

purchasers of its products experiencing a SSNIPT.

Benchmark for the SSNIPT. The HMT asks whether the hypothetical monopolist likely would

worsen terms relative to those that likely would prevail absent the proposed merger. In some cases, the

Agencies will use as a benchmark different outcomes than those prevailing prior to the merger. For

example, if outcomes are likely to change absent the merger, e.g., because of innovation, entry, exit, or

exogenous trends, the Agencies may use anticipated future outcomes as the benchmark. Or, if suppliers

in the market are coordinating prior to the merger, the Agencies may use a benchmark that reflects

conditions that would arise if coordination were to break down. When evaluating whether a merging

firm is dominant (Guideline 6), the Agencies may use terms that likely would prevail in a more

competitive market as a benchmark. 83

If the pricing incentives of the firms supplying the products in the group differ substantially from those of the hypothetical

monopolist, for reasons other than the latter’s control over a larger group of substitutes, the Agencies may instead employ the

concept of a hypothetical profit-maximizing cartel comprised of the firms (with all their products) that sell the products in the

candidate market. This approach is most likely to be appropriate if the merging firms sell products outside the candidate

market that significantly affect their pricing incentives for products in the candidate market. This could occur, for example, if

the candidate market is one for durable equipment and the firms selling that equipment derive substantial net revenues from

selling spare parts and service for that equipment. Analogous considerations apply when considering a SSNIPT for terms

other than price.

83

In the entrenchment context, if the inquiry is being conducted after market or monopoly power has already been exercised,

using prevailing prices can lead to defining markets too broadly and thus inferring that dominance does not exist when, in

fact, it does. The problem with using prevailing prices to define the market when a firm is already dominant is known as the

“Cellophane Fallacy.”

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Magnitude of the SSNIPT. What constitutes a “small but significant” worsening of terms

depends upon the nature of the industry and the merging firms’ positions in it, the ways that firms

compete, and the dimension of competition at issue. When considering price, the Agencies will often use

a SSNIP of five percent of the price charged by firms for the products or services to which the merging

firms contribute value. The Agencies, however, may consider a different term or a price increase that is

larger or smaller than five percent. 84

The Agencies may base a SSNIP on explicit or implicit prices for the firms’ specific contribution

to the value of the product sold, or an upper bound on the firms’ specific contribution, where these can

be identified with reasonable clarity. For example, the Agencies may derive an implicit price for the

service of transporting oil over a pipeline as the difference between the price the pipeline firm paid for

oil at one end and the price it sold the oil for at the other and base the SSNIP on this implicit price.

4.3.C. Evidence and Tools for Carrying Out the Hypothetical Monopolist Test

Section 4.2 describes some of the qualitative and quantitative evidence and tools the Agencies

can use to assess the extent of competition among firms. The Agencies can use similar evidence and

analogous tools to apply the HMT, in particular to assess whether competition among a set of firms

likely leads to better terms than a hypothetical monopolist would undertake.

To assess whether the hypothetical monopolist likely would undertake at least a SSNIP on one or

more products in the candidate market, the Agencies sometimes interpret the qualitative and quantitative

evidence using an economic model of the profitability to the hypothetical monopolist of undertaking

price increases; the Agencies may adapt these tools to apply to other forms of SSNIPTs.

One approach utilizes the concept of a “recapture rate” (the percentage of sales lost by one

product in the candidate market, when its price alone rises, that is recaptured by other products in the

candidate market). A price increase is profitable when the recapture rate is high enough that the

incremental profits from the increased price plus the incremental profits from the recaptured sales going

to other products in the candidate market exceed the profits lost when sales are diverted outside the

candidate market. It is possible that a price increase is profitable even if a majority of sales are diverted

outside the candidate market, for example if the profits on the lost sales are relatively low or the profits

on the recaptured sales are relatively high.

Sometimes evidence is presented in the form of “critical loss analysis,” which can be used to

assess whether undertaking at least a SSNIPT on one or more products in a candidate market would

raise or lower the hypothetical monopolist’s profits. Critical loss analysis compares the magnitude of the

two offsetting effects resulting from the worsening of terms. The “critical loss” is defined as the number

of lost unit sales that would leave profits unchanged. The “predicted loss” is defined as the number of

unit sales that the hypothetical monopolist is predicted to lose due to the worsening of terms. The

worsening of terms raises the hypothetical monopolist’s profits if the predicted loss is less than the

critical loss. While this “breakeven” analysis differs somewhat from the profit-maximizing analysis

called for by the HMT, it can sometimes be informative.

The five percent price increase is not a threshold of competitive harm from the merger. Because the five percent SSNIP is a

minimum expected effect of a hypothetical monopolist of an entire market, the actual predicted effect of a merger within that

market may be significantly lower than five percent. A merger within a well-defined market that causes undue concentration

can be illegal even if the predicted price increase is well below the SSNIP of five percent.

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The Agencies require that estimates of the predicted loss be consistent with other evidence,

including the pre-merger margins of products in the candidate market used to calculate the critical loss.

Unless the firms are engaging in coordinated interaction, high pre-merger margins normally indicate that

each firm’s product individually faces demand that is not highly sensitive to price. Higher pre-merger

margins thus indicate a smaller predicted loss as well as a smaller critical loss. The higher the premerger margin, the smaller the recapture rate 85 necessary for the candidate mar

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