The Multimarket Contact Hypothesis

Abstract: After the Celler-Kefauver Act, case law evolved for the application to conglomerate mergers of Section 7 of the Clayton Act. Given the way that antitrust enforcement procedures have evolved since the Hart-Scott-Rodino Act, the portions of the Supreme Court decisions that constitute the case law about conglomerate mergers have been largely dormant. During the same period when enforcement practices turned away from using the case law toward conglomerate mergers, economists have developed theory and evidence supporting the hypothesis that multimarket contact among diversified sellers can create market power in the individual markets in which the sellers compete – the multimarket contact hypothesis. The hypothesis has implications for Section 7 Clayton Act enforcement actions toward both conglomerate and horizontal mergers. This chapter briefly recaps the case law and the enforcement history, then reviews the theory and evidence supporting the multimarket contact hypothesis, and finally develops the implications of the hypothesis for the antitrust law toward mergers