In one example that took place in 1998, United States v . The complaint alleged that the merger would have created unprecedented vertical and horizontal concentration in the defense industry, which substantially would have lessened, and in several cases eliminated, competition in major product markets critical to the national defense. The merger was disallowed. Merging can create market power, and regulators scrutinize deals in terms of product or service concentration, geography and the availability of substitute products within a market, to be sure the new entity does not overwhelm all competition. New companies can easily enter the market in the near term and provide effective competition.
Federal regulators look at the relevant product market and the geographic marke t in each case.
To determine these markets, some methodology is required. The relevant product market was the subject of much rancor last year during two deals in the prescription drug wholesale market. At the time, McKesson was to merge with AmeriSource and Cardinal Health with Bergen-Brunswig. Regulators said that would have significantly reduced competition in terms of price and services. The companies contended that they fell into a broader market that included other means of distribution, such as direct purchases from manufacturers and self-warehousing.