Market Definition and the Merger Guidelines

The recently issued revision of the U.S. Horizontal Merger Guidelines, like its predecessors and mirrored by similar guidelines throughout the world, devotes substantial attention to the market definition process and the implications of market shares in the market that is selected. Nevertheless, some controversy concerning the revised Guidelines questions their increased openness toward more direct, economically based methods of predicting the competitive effects of mergers. This article suggests that, as a matter of economic logic, the Guidelines revision can only be criticized for its timidity. Indeed, economic principles unambiguously favor elimination of the market definition process altogether. Accordingly, the 2010 revision is best viewed as a moderate, incremental, pragmatic step toward rationality, its caution being plausible only because of legal systems’ resistance to sharp change