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  ![](media/image1.png){width="0.8006944444444445in"   **DEPARTMENT OF JUSTICE**
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[Merger Enforcement Is Alive and Well\
at the Department of Justice]{.smallcaps}

David L. Meyer

Deputy Assistant Attorney General for Civil Enforcement

Antitrust Division

U.S. Department of Justice

Remarks at the

ABA Antitrust Section Fall Forum

Washington, D.C.

November 15, 2007

There have been a variety of reports in recent months suggesting that
merger enforcement at the Department of Justice Antitrust Division is
less vigorous than it once was, and less vigorous than it should be. I
am tempted to respond by adapting the famous quotation attributed to
Mark Twain: "The reports of \[the\] death \[of our merger enforcement
program\] are greatly exaggerated."[^1] In the process of assuring that
I was quoting Twain accurately, I realized that his true remarks are
even more apt. The popular version of this quotation traces to a
handwritten note penned by Samuel Clemens in 1897:

> James Ross Clemens, a cousin of mine was seriously ill two or three
> weeks ago in London but is well now. The report of my illness grew out
> of his illness, the report of my death was an exaggeration.[^2]

Like those who were confused about Clemens' death 110 years ago, those
who misperceive the demise of the Division's merger enforcement program
have not been paying close attention.

I.  DOJ Is Enforcing Section 7 of the Clayton Act Vigorously

Merger enforcement is one of the Division's highest priorities, second
only to our aggressive program of rooting out and prosecuting hard core
criminal cartel behavior. We recognize that most mergers are
procompetitive, or at least competitively neutral, and we will not
interfere with those transactions. But some proposed transactions would
be anticompetitive, creating or enhancing market power that would
disrupt the competitive processes and harm consumers, and we will not
hesitate to enforce the law to protect competition and consumers. No
doubt many more harmful transactions would be proposed were there no
regime of antitrust merger review.

**A. [Our Merger Enforcement Program]{.underline}**

Our merger enforcement program aims to identify quickly and efficiently
that subset of transactions likely to be harmful, and allow the others
to proceed with minimal delay and regulatory burden. When we do see the
potential for competitive harm, however, we take very seriously our
responsibility to protect competition and consumers. First and foremost,
that means applying the well-established framework of the Horizontal
Merger Guidelines and bringing to bear the very best possible
investigative and analytical skills to determine whether, in our view,
the transaction is likely to cause substantial harm to competition. For
most of the transactions we investigate every year, our legal and
economic staffs very quickly conclude that such harm is not likely, and
recommend that we close our investigation promptly, often without the
need for a Second Request. Even when we conclude we should issue a
Second Request, it does not foreordain a six month march toward full
compliance. Very often we do so because we need some additional time to
complete our review of a dispositive issue -- perhaps market definition,
perhaps the likelihood of entry, perhaps some other topic -- or need
access via formal process to a subset of company documents to confirm a
conclusion that the transaction is unlikely to be harmful.

Importantly, only a small minority of our investigations lead our staff
to conclude that a proposed transaction is likely to cause substantial
harm. When staff does reach that conclusion, however, we are cognizant
of the fact that we do not possess any authority to command that parties
abandon or restructure their transaction. We are law enforcers, not
sector regulators. If we believe that a transaction would violate
Section 7, we must persuade a district court that we are correct and
invoke the equitable power of the court to enjoin the transaction or
require an appropriate remedy. Pleading and proving a Section 7
violation in court poses challenges, as some recent outcomes in
litigated merger cases underscore.

I'll not opine in this forum as to the reasons for those results.
Suffice it to say that winning in court is something we must do if
parties choose to go forward with their transaction over our objections,
and -- unlike the days of *Von's Grocery*, when the "Government always
\[won\]"[^3] -- victory is not guaranteed. Do we take into account
whether we could prevail in court if we were put to that test?
Absolutely. It would be irresponsible to bring cases that we had no
reasonable expectation of winning. But let me be very clear: we are not
at all deterred by the Division's loss in *Oracle*, or the FTC's recent
losses in *Arch Coal*, *Whole Foods*, and *Western Refining*. Those
outcomes reinforce the need -- of which we were already aware -- to pay
attention to our litigation preparedness, and specifically how we would
persuade a court of the correctness of the conclusion about the
transaction's likely effects that we have already reached. We will
continue to be vigilant in enforcing the law against transactions that
would violate the antitrust laws and harm competition and consumers. [\
]{.mark} **B. [Our Record Demonstrates Our Vigor]{.underline}**

Look at our recent merger enforcement record. Since June of last year,
the Division challenged or caused the restructuring of 18 transactions,
and filed 15 complaints alleging violations of Section 7 of the Clayton
Act. Those challenges have covered virtually the entire waterfront of
potential theories of competitive harm.

I'll mention first the lawsuit we filed in May 2007 against the Daily
Gazette Company and MediaNews Group challenging Daily Gazette's
acquisition in 2004 of all the assets of the only other daily newspaper
in Charleston, West Virginia.[^4] Litigation in that case is pending --
demonstrating that that we are willing and prepared to litigate when the
parties do not consent to adequate relief.[^5] The Charleston case
raises some interesting issues given its context: many of the
operational aspects of the two papers -- including the pricing of
advertising and subscriptions -- had been combined since 1958 in a joint
operating arrangement, but the owners of those papers retained the
ability and incentive to compete with one another to attract readers to
their own newspaper, rather than merely enhancing the value of the
venture. The acquisition extinguished that competition, and would have
swiftly led to the closure of the acquired newspaper had our
investigation not intervened.[^6] Defendants cite *Dagher* and the
antitrust immunity granted by the Newspaper Preservation Act in support
of their motion to dismiss, which we have opposed.[^7]

In many other cases we have obtained relief by settling our Section 7
claims via consent decree. Consent decrees are an "'integral part of
antitrust enforcement.'"[^8] They provide an efficient way to resolve
our Section 7 claims, avoiding anticompetitive harm while allowing
beneficial aspects of transactions to proceed, and also avoiding the
many risks and burdens of adversarial litigation, including the
possibility of losing the suit.[^9] In still other cases our
investigation led parties to fix their transaction in a manner that
avoided anticompetitive harm.[^10]

Some of the challenges resolved by decree addressed unilateral effects.
We challenged several transactions because the firms in the market were
differentiated from the perspective of consumers and we concluded that
the transaction would combine the number one and two options for a
substantial number of consumers. In both Cemex/Rinker[^11] and
Vulcan/Florida Rock,[^12] announced this week, we concluded the
transactions would have anticompetitive unilateral effects in several
markets because, although there would remain two or three competitors
post-merger, the firms were differentiated in geographic space due to
high transportation costs relative to product value. In ATT/Dobson, the
differentiation was in the nature of wireless telephone service offered
by market participants. In the geographic markets of concern, the
wireless networks wholly or partly owned by the parties "provide\[d\]
greater depth and breadth of coverage than their PCS-based competitors"
and thus, for a large set of customers, likely were "closer substitutes
for each other than the other mobile wireless telecommunications
services in these markets provided by firms who own only PCS
spectrum."[^13]

We challenged two other transactions that raised unilateral effects
concerns involving undifferentiated products. In both
Abitibi/Bowater[^14] -- involving newsprint -- and Exelon/PSE&G[^15] --
involving wholesale electricity generation in the PJM transmission area
-- we concluded that the transaction would give the merged firm the
incentive and ability to raise price by withholding capacity, regardless
of the responses of other firms, because those other firms would lack
sufficient capacity to defeat a price increase.[^16]

We have also actively investigated potentially anticompetitive
coordinated effects. At least three of our challenges in the past 18
months resulted from our conclusion that the transaction would increase
the likelihood that the remaining firms in the market would successfully
coordinate, tacitly or explicitly, to raise prices. In
Mittal/Arcelor,[^17] we concluded that the transaction would result in
two firms -- the merged firm and a third party -- accounting for more
than 80 percent of all sales of tin mill products in the eastern United
States. Coordination between those firms would be profitable regardless
of the response of the remaining fringe, and would be more likely to
succeed given that the firms would no longer need to worry about
disruption by Arcelor's Dofasco mill, located in southern Ontario. In
both Cemex/Rinker and Vulcan/Florida Rock, we concluded that the
transactions would have anticompetitive coordinated effects in certain
markets, and in at least one such market coordinated effects were our
principle concern.[^18] In Vulcan/Florida Rock, for example, we alleged
that the merger would reduce the number of firms competing for sales of
coarse aggregate in West Atlanta from four to three, making tacit or
explicit coordination more likely.[^19]

In addition to challenges based on each of the categories of potential
effects addressed in the Horizontal Merger Guidelines, this past year we
challenged a *vertical* transaction that threatened harm to *potential
future* competition. In Monsanto/D&PL,[^20] the parties' proposed
transaction contemplated that Monsanto would sell its Stoneville seed
company, largely removing the horizontal overlap in cottonseed sales.
Our investigation thus focused on the vertical aspects of the
transaction: whether Monsanto's acquisition of D&PL would harm nascent
competition in markets for transgenic cottonseed traits in the Southeast
and South Central United States. Monsanto was the first to develop
successful traits, and almost all cotton grown in these regions uses one
or both of Monsanto's traits -- "Roundup Ready," which makes cotton
tolerant to glyphosate herbicide, allowing such herbicide to be sprayed
over the top of cotton containing the trait, killing weeds but not the
cotton plants; and "Bollgard," which makes cotton plants resistant to
many insects. We concluded that Monsanto's acquisition of D&PL would
thwart or delay efforts by rival trait developers to bring competing
traits to market, by disrupting ongoing development work or depriving
those rivals access to the cottonseed material (germplasm) with a proven
track record in the Southeast and South Central United States, where
traits were most highly valued by farmers. Although we concluded that a
divested Stoneville would provide a good platform for such trait
development efforts, we determined that more needed to be done to avoid
competitive harm, most significantly: (1) divestiture to the buyer of
the Stoneville assets of rights to significant amounts of D&PL's most
promising germplasm; (2) divestiture to Syngenta of the most promising
D&PL germplasm containing the trait that Syngenta was developing in
partnership with D&PL; and (3) modification of terms in Monsanto's
licenses with third party seed companies that provided incentives to use
only Monsanto traits to the exclusion of traits developed by others.

The vast majority of our merger challenges prevent the consummation of
proposed transactions that would have harmed competition. This is a one
of the chief benefits of the HSR Act's system of pre-notification. Even
where the Act does not apply we have intervened to undo the adverse
effects of transactions that have already been consummated. I have
already mentioned the pending litigation involving Charleston
newspapers. We also challenged Amsted's acquisition of the FM Industries
(FMI) unit of Progress Rail Services, which created a monopoly in the
market for end-of-car cushioning units used by certain types of
railcars.[^21] In Amsted/FMI, we persisted even though the defendant had
already "dismantled FMI by firing its employees and disposing of
virtually all FMI plant equipment through an auction." [^22] A creative
remedy was necessary to restore competition, so we required that Amsted
sell rights to its "market-specific intellectual assets," including
intangible assets and a royalty-free license to casting patterns, which
together with readily available manufacturing equipment, would allow a
new entrant to produce new end-of-car cushioning units in competition
with Amsted.[^23]

Finally, we have undertaken -- and are currently undertaking -- serious
investigations of transactions involving partial acquisitions. The
transactions we have seen involve many permutations of minority
ownership overlap. In ATT/Dobson, two wireless telephone markets
involved overlaps between Dobson and businesses in which ATT held
minority interests that were small in percentage terms, but gave ATT
"significant rights under each relevant partnership agreement to control
core business decisions, obtain critical confidential competitive
information, and share in profits at a rate significantly greater than
the equity ownership share upon a sale of the partnership."[^24] As a
result, we concluded that ATT would "likely have the ability and
incentive to coordinate the activities of the wholly-owned Dobson
wireless business and the business in which it has a minority
stake."[^25] In the Hearst/MediaNews matter, Hearst was proposing to
acquire a new class of shares of MediaNews, which operates newspapers
around the country. Hearst and MediaNews were each other's principal
daily newspaper competitors in the San Francisco Bay Area, and for that
reason structured Hearst's equity investment as a "tracking stock" that
the parties asserted was intended to give Hearst approximately a 30
percent stake only in MediaNews' newspaper operations outside the Bay
Area.[^26] We examined this arrangement closely, with a particular focus
on whether Hearst's investment would give Hearst influence over
MediaNews' business decisions relating to the Bay Area, provide Hearst
with access to competitively sensitive information relating to the Bay
Area, or create incentives for Hearst to disengage from aggressive
competition against MNG in the Bay Area. As a result of our
investigation, the parties made several revisions to their proposed
relationship to avoid potential adverse effects on competition between
the parties in the Bay Area.[^27]

II. The Vigor of the Division's Merger Enforcement Should Not Be
    Misjudged

The Division's record of vigorous yet sound merger enforcement should
speak for itself. Lest there be any doubt about our resolve to challenge
those transactions that are likely to cause competitive harm, allow me
to elaborate on a few points.

** *The* Oracle *loss***

First, observers of our merger enforcement program should not infer from
the fact that the last merger case that went to litigated decision --
*Oracle*[^28] -- ended in a loss that the Division is reluctant to
challenge mergers that we conclude likely would harm competition and
consumers. Merging parties should not misjudge our will. If we conclude
that a transaction would violate Section 7, we will be prepared to
litigate to give force to that conclusion. As we have said now many
times, if the facts in *Oracle* were presented again, we would litigate
the case again.

To set the record straight, the Division has in fact litigated merger
cases since losing in *Oracle*. We are currently in litigation in West
Virginia over the Charleston newspapers matter discussed above,[^29] and
we were preparing to go to trial against the acquisition by Dairy
Farmers of America, Inc., of a controlling interest in Southern Belle
Dairy Company, LLC, when the parties settled on the courthouse
steps.[^30]

In addition, the Division *would have* litigated many more merger cases
had the parties not settled our claims by offering sufficient relief to
eliminate our competitive concerns -- protecting competition and
consumers by providing all the relief we could have hoped to obtain
through adversarial litigation. As I have said, each of our consent
decrees reflects an efficient resolution of a complaint alleging a
violation of Section 7. The relief obtained in these decrees should not
be viewed as reflecting any less vigorous or effective merger
enforcement than a dozen or more adversarial hearings over government
requests for preliminary or permanent injunctions. The latter, while
perhaps garnering greater publicity, would only have served to increase
the burdens on us, the courts, and the parties, while simultaneously
increasing the risk that our goals of protecting competition and
consumers might have been less well served.

** *Statistics on the number of merger challenges.***

Counting up the number of merger challenges -- litigated or otherwise --
that the Division has recently undertaken as compared to past years
cannot provide a reliable indication of the vigor of our merger
enforcement. Were such numerical comparisons offered as evidence in a
merger case, they would be laughed out of court.

Start with the fact that, in any period, at most a relatively small
number of transactions -- out of the vast universe of all merger
proposals -- will raise competitive concerns. Drawing conclusions from
shifts in small numbers is perilous under any circumstances.[^31] That
is especially so when the Division has no control over what transactions
are proposed to us. We look at each and every transaction the same way,
applying our analytical framework to an intensive evaluation of the
facts. The number of times we conclude a challenge is appropriate
reflects the number of problematic transactions that are proposed,
nothing more, nothing less. Correlation in these circumstances is a far
cry from causation. To drive this point home, if I told you that the
Nuclear Regulatory Commission did not turn down a single application to
build a nuclear power plant in the United States between 1977 (just
before the Three Mile Island incident) and 2007, would you conclude that
regulatory policy was too lax?[^32]

Equally important, efforts to glean enforcement policy, or vigor, from
apparent differences in the number of challenges over time would founder
on other important facts. In thinking about *why* we might have
challenged fewer mergers, it is sensible first to ask whether there is
any reason to expect that fewer problematic mergers are being proposed.
I submit there are two reasons to think so, having nothing to do with
changing views about what makes a transaction "problematic." First, over
the past several decades we (and our counterparts at the Federal Trade
Commission) have done a good job of educating the business community
(and their antitrust counselors) about the kinds of transactions that
are likely to raise antitrust concerns. I would point not just to the
Horizontal Merger Guidelines and the Commentary on those Guidelines
issued in 2006,[^33] but the considerable further details about how we
have analyzed particular transactions that we provide in Competitive
Impact Statements (when we challenge a transaction), Closing Statements
(when we don't), and the many discussions of our investigations in
speeches by Division officials. As a result of these efforts to foster
greater transparency, parties are better equipped than ever to steer
clear of transactions that would guarantee a challenge. Not
surprisingly, few blatantly anticompetitive mergers are proposed, and
where transactions do raise clear concerns the parties typically come
forward quickly with a fix that eliminates potential competitive harm.

Second, wholly independent of parties' understanding of the antitrust
constraints on their deal-making, there may be reasons to think that the
mix of transactions presented for review has evolved over time to pose
fewer competition concerns.[^34] For example, many of the transactions
we see involve companies that operate in the services and technology
sectors, where it might be thought that -- on average -- transportation
costs are lower and change more rapid than in some of the more
traditional "industrial" sectors of the economy. With the broader
economy constantly undergoing evolutionary change, there may be many
reasons why one might reasonably expect to see a smaller percentage of
transactions challenged even if antitrust policy remained perfectly
constant.

As a result, I submit that looking at the number of transactions we
challenge without controlling for the characteristics of the
transactions presented for our review provides no useful insights into
the vigor or effectiveness of our enforcement program. The fact is we
challenge the transactions that are likely to cause competitive harm and
do not challenge those that are not.

** *Our internal merger review processes***

Our internal merger review process, and in particular the involvement of
the "Front Office" (*i.e.*, the Office of Operations, the pertinent
Deputy Assistant Attorneys General, and ultimately the Assistant
Attorney General), is designed to make our merger investigations more
efficient and effective. To be sure, recommendations to challenge must
go through a series of steps before the Division will file a complaint
in court. But this has always been true, and it does not create any bias
against challenging problematic transactions. To the contrary, we
encourage our legal and economic staffs to investigate potentially
anticompetitive transactions vigorously. We ask them to dig out the
relevant facts and apply sound economic and legal analysis in making a
determination whether the transaction is likely to cause harm to
competition and consumers. When our staffs conclude that a transaction
should be challenged, their recommendation is reviewed by the Front
Office but that review is not designed to interpose a more stringent
test than our staffs impose on themselves. Indeed, the Front Office is
involved at every stage of these investigations, so that in virtually
every case there is agreement about what course to pursue. When our
staff's investigation demonstrates that a transaction is likely to cause
substantial harm to competition and consumers, and that the Division
likely could persuade a district court that it should exercise its
remedial powers to prevent a violation of law, we will not hesitate to
challenge the transaction.

The effectiveness and efficiency of our review processes is not always
completely transparent to the outside world. Because the outcome of our
merger review does not hinge on HHI calculations or any other objective
or readily observable benchmark, the time and effort we will need to
conduct an investigation of any particular transaction is not perfectly
predictable when a transaction is proposed. But in every case we tailor
the investigation to match the facts presented. The Division sometimes
is able to close an investigation of transactions in markets that are or
appear moderately or highly concentrated without the need for intensive
document or data review, based on our own industry expertise or facts
that are readily obtainable early in our investigation. In other
situations the Division must seek documents or data via Second Request
or CIDs before we can conclude that competitive harm is unlikely. And
many times when we conclude that a Second Request should be issued, we
are nevertheless able to focus our further investigation on a subset of
dispositive issues and thereby conclude in short order that the
transaction is unlikely to cause competitive harm.

We are quite effective at tailoring our investigations to the
circumstances. One measure of our success is the frequency with which we
are able to close our investigation quickly despite having concluded
that a Second Request should be issued. In 60 percent of such
investigations over the past year we were able to close our
investigation less than 90 days following the expiration of the initial
waiting period.[^35] We think this kind of flexibility and efficiency is
a good thing, and it certainly should not be mistaken for an unfocused
churning of our merger investigations.

> ** *We didn't challenge Whirlpool/Maytag***

I can't escape the subject of the Division's merger enforcement program
without commenting on Whirlpool/Maytag. There are two distinct issues
here.

Let me start by observing that, even we were to assume -- without any
factual foundation, I might add -- that not challenging Whirlpool/Maytag
was a mistake, it alone would not demonstrate any systematic bias in the
Division's enforcement decisions. At most it would demonstrate that our
predictions in that one case turned out to be wrong. An error in one
case might simply mean that we misjudged some critical fact, or that
circumstances unfolded in an unpredictable way.[^36]

The second issue is whether the Division was correct in declining to
challenge the merger. On this point, the Division previously has
explained the reasons for its decision, and I will not revisit them
here, except to note that those reasons had nothing to do with any bias
against challenging transactions that we think are likely to harm
competition.[^37]

It is particularly unproductive to debate the Division's decision in
Whirlpool/Maytag in a factual vacuum. That decision was based on an
extraordinary amount of non-public information on market conditions that
informed the Division's in-depth analysis. It would be vastly
oversimplistic to assume that the merger should have been challenged
solely because the market for washers and dryers was highly concentrated
and the merger would have significantly increased concentration. There
never was any question that the transaction would increase concentration
in a concentrated market, but I should not have to remind anyone that
merger analysis has come quite far from the days when concentration
figures alone were a good predictor of anticompetitive harm. No sensible
proponent of antitrust enforcement could seriously favor a return to the
days when merger analysis stopped there, and mergers were routinely
blocked just because they would increase concentration in a highly
concentrated market.

III. A Transaction's Impact on Market Structure Is Only the Starting
     Point for Merger Analysis

The case law long ago established that a structural analysis of
concentration is only the starting point for merger review.[^38] The
Horizontal Merger Guidelines are similarly clear. [^39] Our recent
experience analyzing proposed mergers confirms that, while relevant and
sometimes significant, a transaction's impact on concentration does not
irrefutably establish its competitive merits.

The traditional market structure-performance paradigm stems in large
part from the expectation that tacit (or explicit) coordination is more
likely in markets that are more highly concentrated. That concern is at
its zenith when products are homogeneous, pricing is transparent, and
the pace and character of transactions minimizes incentives to cheat and
allows swift punishment for deviations. In many of the cases we review
involving markets that are arguably highly concentrated, however,
conditions for coordination are far less straightforward. Products (or
services) are often highly customized, pricing and other terms are
correspondingly complex and confidential, and winner-take-all long-term
contracts with large customers often create incentives to cheat and
reduce opportunities for effective retaliation.

This is not to say we unthinkingly reject concerns about potential
coordination, or assume that the kinds of factors I have outlined always
make coordination unlikely. We do not. Especially where concentration is
high, or where evidence indicates that coordination schemes have been
attempted in the past, we consider carefully whether a proposed merger
is likely to make coordination more likely. Our challenges in
Mittal/Arcelor and Vulcan/Florida Rock should demonstrate that we take
coordination concerns seriously.[^40] For example, we ask whether all
the firms in the market would need to join in coordination in order to
make it profitable for the largest firms to implement a tacit
agreement.[^41] We explore potential means of coordination that avoid
the complexities of transaction- or customer-specific pricing, such as
potential mechanisms involving allocations of customers or market share.
And we ask whether the parties likely could alter the way in which goods
or services are transacted post-merger so as to make coordination more
feasible.

Whether or not anticompetitive coordination is likely, we will also
analyze potential unilateral effects. In this realm, the role of
concentration is far less well developed. Some of our recent challenges
based on unilateral effects concerns have involved relatively
unconcentrated markets, as in Exelon/PSE&G, where the post-merger HHI
was in the range of 2,200.[^42] In others -- such as ATT/Dobson -- the
merging firms accounted for a very high percentage of all sales in the
market. Likewise, the transactions we did not challenge fell across the
full spectrum of concentration: from those that had little effect on
concentration in unconcentrated markets to those that may have appeared
to increase it substantially in relatively concentrated markets.

In the latter cases especially it may be tempting for outside observers
to perceive that a challenge is likely, and to be surprised when one is
not forthcoming. In fact, however, our analysis is far more
sophisticated, and our decisions are uniformly based on our in-depth
assessment of the pertinent facts. Allow me to illustrate by addressing
just two of the issues that have proven dispositive in recent
investigations:

***Are the merging firms really the first and second choices for any
distinct group of customers?*** When coordination is unlikely and
products are substantially differentiated, the most plausible theory of
unilateral competitive harm typically will be that the merger would
combine the first and second choices of a significant group of
customers. Sometimes initial indications -- and even 4(c) documents --
give credence to such a hypothesis. One of the first steps in such an
investigation will be to probe the facts bearing on this issue.
Sometimes interviews of a cross-section of both firms' customer base are
enough to persuade us that customers view other firms as offering
options that are sufficiently close to rule out any substantial
competitive harm. Sometimes we must wade into the data on bidding
patterns. When those data show that customers disproportionately choose
firms other than the merging parties -- as was the case in
Blackboard/WebCT[^43] -- that can be strong evidence that
anticompetitive harm is unlikely.

Note that a critical factor in this analysis is the question whether the
merged firm could feasibly identify which customers lack effective
options so as to exploit the enhanced market power it would obtain
vis-à-vis that group of customers without experiencing an unprofitable
flight of customers that have additional options. Sometimes company
documents make plain that each customer's option-set is well understood.
In other cases, however, the facts drive the opposite conclusion,
leading us to conclude that anticompetitive harm is unlikely because the
merged firm would not risk losing important customers whose array of
options they do not well understand.

***Will entry or repositioning by other incumbents preclude a sustained
price increase by the merged firm?*** When it appears likely that the
merging firms are in fact the first and second choices of a substantial
group of customers, the question often arises: couldn't other firms fare
equally well at satisfying these customers? Within the Guidelines
framework, this question raises issues of entry and expansion, or in the
vernacular of firms offering differentiated products, "repositioning."

These issues are very often the salient factual questions in our merger
investigations, and they can be hard ones to assess. We do not merely
assume that entry or repositioning will be "timely, likely and
sufficient" to prevent a significant price increase, especially where
the facts show that the merged firms have sustained high shares of the
market (or relevant customer group) for some time. Especially in
rapidly-evolving technology markets, it is not uncommon for the merging
parties to point to a number of firms that seem poised to attract a
substantial number of customers if the merged firms were to raise price.
Two scenarios are fairly common: (a) firms already in the market that
are asserted to have plans to introduce products that will capture a
significant portion of the merged firms' base of customers, and (b)
firms that offer products different from those of the merging parties,
but which a significant number of customers assertedly would find
attractive as technology and customer demand evolves. Both of these
scenarios, if borne out by the facts, potentially could prevent a
proposed merger from having anticompetitive effects.

But we do not merely assume that the nascent competitors identified by
the parties would in fact emerge sufficiently soon and with sufficient
scale to preclude anticompetitive harm. Rather, we must investigate the
facts, which often requires that we not only interview customers and the
supposed competitors, and seek documents from the parties reflecting
their views of future competitive threats, but also in appropriate cases
issue CIDs to the competitors to probe their *internal* assessment of
their prospects.

IV. Conclusion

I have in many ways only scratched the surface of our merger review. But
it should be clear that merger enforcement is alive and well at the
Department of Justice. We devote substantial resources to analyzing each
and every transaction presented for our review, plus many other
non-reportable transactions that we identify on our own initiative. In
deciding whether those transactions likely would harm competition, we
are driven by the facts and sound economic analysis. We will not
hesitate to challenge transactions that we conclude are likely to cause
harm to competition and consumers, as a fair review of our record will
confirm. Parties who underestimate our resolve do so at their peril.

[^1]: Deborah Feinstein has similarly concluded that "reports of the
    complete demise of federal merger enforcement have surely been
    exaggerated." Deborah L. Feinstein, Recent Trends in U.S. Merger
    Enforcement: Down But Not Out, [Antitrust,]{.smallcaps} Summer 2007,
    74, 80.

[^2]: Mark Twain Quotations---Death,
    http://www.twainquotes.com/Death.html (last visited Nov. 14, 2007).

[^3]: United States v. Von's Grocery Co., 384 U.S. 270, 301 (1966)
    (Stewart, J., dissenting).

[^4]: *See* Complaint, United States v. Daily Gazette Co., No. 2:07-0329
    (S.D. W. Va. May 22, 2007), *available at*
    http://www.usdoj.gov/atr/cases/f223400/223469.pdf.

[^5]: *See* *infra* pp. 12-13.

[^6]: *See* Complaint, *supra* note 4, para. 23.

[^7]: *See* Memorandum of the United States in Opposition to Defendants'
    Motion to Dismiss, *Daily Gazette*, No. 2:07-0329 (S.D. W. Va. Oct.
    5, 2007).

[^8]: United States v. Gillette Co., 406 F. Supp. 713, 715 (D. Mass.
    1975) (citation omitted).

[^9]: Recognizing these benefits, Senator Tunney observed in 1973 that
    courts reviewing the Division's settlements pursuant to what became
    known as the Tunney Act should not "engage in extended proceedings
    which might have the effect of vitiating the benefits of prompt and
    less costly settlement through the consent decree process." 119
    Cong. Rec. 24,598 (1973); *see also, e.g.*, McDermott, Inc. v.
    AmClyde, 511 U.S. 202, 215 (1994) (noting that "public policy wisely
    encourages settlements").

[^10]: [Antitrust Div., U.S. Dep't of Justice, Antitrust Division Policy
    Guide to Merger Remedies]{.smallcaps} 26 (2004), *available at*
    http://www.usdoj.gov/atr/ public/guidelines/205108.pdf ("A
    fix-it-first remedy is a structural remedy that the parties
    implement and the Division accepts before a merger is consummated. A
    fix-it-first remedy eliminates the Division\'s antitrust concerns
    and therefore the need to file a case.") (footnote omitted).

[^11]: *See* Competitive Impact Statement, United States v. Cemex,
    S.A.B. de C.V., No. 1:07-cv-00640 (D.D.C. May 23, 2007), *available
    at* http://www.usdoj.gov/atr/cases/f223500/223543.pdf.

[^12]: *See* Competitive Impact Statement, United States v. Vulcan
    Materials Co., No. 1:07-cv-02044-EGS (D.D.C. Nov. 13, 2007).

[^13]: Competitive Impact Statement at 11, United States v. AT&T Inc.,
    No. 1:07-cv-01952 (D.D.C. Oct. 30, 2007), *available at*
    http://www.usdoj.gov/atr/cases/f227300/227309.pdf.

[^14]: *See* Competitive Impact Statement, United States v.
    Abitibi-Consolidated Inc., No. 1:07-cv-01912 (D.D.C. Oct. 23, 2007),
    *available at* http://www.usdoj.gov/atr/cases/f227100/227108.pdf.
    The author was recused from the Division's investigation in this
    matter.

[^15]: *See* Competitive Impact Statement, United States v. Exelon
    Corp., No. 1:06-cv-01138 (D.D.C. Aug 10, 2006), *available at*
    http://www.usdoj.gov/atr/cases/f217700/217717.pdf.

[^16]: *See id.* at 10; Competitive Impact Statement, *supra* note 14,
    at 6; *see also* Elizabeth Armington et al., *The Year in Review:
    Economics at the Antitrust Division, 2005-2006*, 29 [Rev. Indus.
    Org.]{.smallcaps} 305, 315-23 (2006).

[^17]: *See* Competitive Impact Statement, *United States v. Mittal
    Steel Co.*, No. 1:06-cv-01360-ESH (D.D.C. Aug. 1, 2006), *available
    at* http://www.usdoj.gov/atr/cases/f217400/217491.pdf.

[^18]: As noted above, we also concluded that the transactions would
    have anticompetitive unilateral effects in several markets. *See*
    *supra* notes 11, 12, and accompanying text.

[^19]: Complaint paras. 38, 43, *Vulcan Materials*, No.
    1:07-cv-02044-EGS (D.D.C. Nov. 13, 2007).

[^20]: *See* Competitive Impact Statement, United States v. Monsanto
    Co., No. 1:07-cv-00992-RMV (D.D.C. May 31, 2007), *available at*
    http://www.usdoj.gov/atr/cases/f223600/223682.pdf.

[^21]: *See* Competitive Impact Statement, United States v. Amsted
    Indus., Inc., No. 1:07-cv-00710 (D.D.C. Apr. 18, 2007), *available
    at* http://www.usdoj.gov/atr/cases/ f222700/222730.pdf. The author
    was recused from the Division's investigation in this matter.

[^22]: *Id.* at 1.

[^23]: *See id.* at 10.

[^24]: Competitive Impact Statement, *supra* note 13, at 9.

[^25]: *Id*.

[^26]: *See* Press Release, U.S. Dep't of Justice, Statement of the
    Department of Justice's Antitrust Division Regarding Its
    Investigation of Hearst Corporation's Proposed Acquisition of
    Tracking Stock in MediaNews Group Inc. (Oct. 25, 2007), *available
    at* http://www.usdoj.gov/atr/public/press_releases/2007/227168.pdf.

[^27]: The parties' revised Shareholders Agreement covering Hearst's
    Class C stock in MediaNews was filed with the SEC and is available
    at http://www.medianewsgroup.com/ Financials/
    Forms/2007/Form%208-K%20-%20Web%20Site.pdf.

[^28]: United States v. Oracle Corp., 331 F. Supp. 2d. 2d 1098 (N.D.
    Cal. 2004).

[^29]: *See supra* note 4 and accompanying text.

[^30]:
    ##  United States v. Dairy Farmers of Am., Inc., No. Civ. A. 6:03-206-KSF, 2007 WL 1200094 (E.D. Ky. Mar. 23, 2007). The complaint in the Dairy Farmers case was filed in 2003, but the Division was pursuing its claims to trial following a successful appeal and remand, both of which post-dated the district court's decision in Oracle.

[^31]: *See, e.g.*, [ABA Section of Antitrust Law, Am. Bar Ass'n,
    Econometrics]{.smallcaps} 15-16 (2005).

[^32]:
    ###  In fact no applications to build new plants were filed between 1977 and 2007. *See, e.g.*, *Companies File the First Nuclear Plant Application in 29 Years*, EERE [Network News]{.smallcaps} (U.S. Dep't of Energy/Washington, D.C.), Sept. 26, 2007, http://www.eere.energy.gov/news/news_detail.cfm/news_id=11307.

[^33]: [U.S. Dep't of Justice & Fed. Trade Comm'n,]{.smallcaps}
    [Commentary on the Horizontal Merger Guidelines]{.smallcaps} (2006),
    *available at*
    http://www.usdoj.gov/atr/public/guidelines/215247.htm.

[^34]: Baker and Shapiro acknowledge that such trends could explain
    variations in enforcement statistics. *See* Jonathan B. Baker & Carl
    Shapiro, *Reinvigorating Horizontal Merger Enforcement* 13 (Oct.
    2007) (unpublished working paper), *available at*
    http://faculty.haas.berkeley.edu/shapiro/mergerpolicy.pdf.

[^35]: This calculation is based on transactions for which the initial
    HSR waiting period expired between June 1, 2006 and July 31, 2007,
    and includes both those in which a Second Request was issued and
    those that were "pulled and refilled" to extend the waiting period,
    whether or not a Second Request was ultimately issued.

[^36]: I am indebted to Dennis Carlton for the insight that any
    retrospective assessment of merger *policy* -- as distinct from the
    correctness of any given enforcement decision -- must proceed by
    examining the universe of transactions that were investigated. As he
    explains, even if merger policy were exactly right, it would still
    be true that the government would make random errors in cases.

[^37]: *See* Press Release, U.S. Dep't of Justice, Department of Justice
    Antitrust Division Statement on the Closing of Its Investigation of
    Whirlpool's Acquisition of Maytag (Mar. 29, 2006), *available at*
    http://www.usdoj.gov/atr/public/press_releases/2006/215326.pdf; *see
    also* Thomas O. Barnett, Assistant Attorney Gen., U.S. Dep't of
    Justice, Merger Review: A Quest for Efficiency, Remarks at the New
    York State Bar Association Antitrust Section Annual Meeting 10-11
    (Jan. 25, 2007), *available at*
    http://www.usdoj.gov/atr/public/speeches/221173.pdf.

[^38]: *See, e.g.*, United States v. Gen. Dynamics Corp., 415 U.S. 486,
    501-04 (1974).

[^39]: [U.S. Dep't of Justice & Federal Trade Comm'n, Horizontal Merger
    Guidelines]{.smallcaps} § 1.52 (1997), *available at*
    http://www.usdoj.gov/atr/public/guidelines/hmg.pdf.

[^40]: *See* *supra* notes 17-19 and accompanying text.

[^41]: Such an analysis can entail a critical loss assessment, which
    asks whether the coordinating firms would lose sufficient volume to
    the non-colluding fringe in order to render the coordination
    unprofitable.

[^42]: *See* Competitive Impact Statement, *supra* note 15, at 10;
    Barnett, *supra* note 37, at 11; David L. Meyer, *Section 2
    Standards and Consumer Welfare: Some Lessons from the World of
    Merger Enforcement*, 2007 [Colum. Bus. L. Rev.]{.smallcaps} 371,
    397.

[^43]: Armington et al., *supra* note 16, at 307; Meyer, *supra* note
    42, at 396-97.