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Journal of Economic Perspectives: Vol. 1 No. 2 (Fall 1987)

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Horizontal Merger Policy: Problems and Changes

Article Citation

Schmalensee, Richard. 1987. "Horizontal Merger Policy: Problems and Changes." Journal of Economic Perspectives, 1(2): 41-54.

DOI: 10.1257/jep.1.2.41

Abstract

Most knowledgeable economists seem now to agree that the Department of Justice, the Federal Trade Commission, and the courts were excessively hostile to horizontal mergers in the 1960s. There also seems to be widespread agreement that the 1984 Merger Guidelines provide a useful general framework for evaluating the economic effects of proposed mergers. However, there is less agreement on the merits of the specific standards set forth in the Guidelines or of those employed in practice, which tend to be more permissive. There is even less agreement on the desirability of proposed changes in the underlying law, Section 7 of the Clayton Act. In what follows I argue that, while it might be desirable to make small changes in the core language of Section 7, the Reagan administration's proposals for major changes should not be adopted. In particular, it would not be desirable to require courts to consider the efficiency effects of proposed mergers, nor should they be given a long list of other factors that must be considered in merger cases. I also argue that some changes in the current merger Guidelines and in enforcement policy would be desirable, but I do not think radical reform is called for here either.

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Authors

Schmalensee, Richard (Unlisted)

JEL Classifications

611: Market Structure: Industrial Organization and Corporate Strategy
612: Public Policy Towards Monopoly and Competition

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