DRAFT – FOR PUBLIC COMMENT PURPOSES – NOT FINAL
Clayton Act.
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“Th[is] entrenchment doctrine properly blocks artificial competitive advantages
… but not simple improvements in efficiency.”
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These concerns can arise in mergers that are neither strictly horizontal nor vertical, so the
Agencies seek to identify any connection suggesting the merger may entrench or extend the
dominant position.
To evaluate this concern, the Agencies consider whether (a) one of the merged firms
already has a dominant position, and (b) the merger may entrench or extend that position. The
Agencies assess the magnitude of the lessening of competition that may arise from entrenching a
dominant position based on the degree of dominance already held and the extent to which it
would be entrenched by a merger. The greater the dominance already held, the lower the degree
of entrenchment that gives rise to a substantial lessening of competition. When one merging firm
has or is approaching monopoly power, any acquisition that may tend to preserve its dominant
position may tend to create a monopoly in violation of Section 7.
To identify whether one of the merging firms already has a dominant position,
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the
agencies look to whether (i) there is direct evidence that one or both merging firms has the power
to raise price, reduce quality, or otherwise impose or obtain terms that they could not obtain but-
for that dominance, or (ii) one of the merging firms possesses at least 30 percent market share.
If this inquiry reveals that at least one of the merging firms already has a dominant
position, the Agencies then examine whether the merger would either entrench that position or
extend it into additional markets.
Entrenching a Dominant Position. The Agencies examine whether the merger may
entrench the dominant position through any mechanism consistent with market realities that
lessens the competitive threats the merged firm faces. For example:
A. Increasing Entry Barriers Generally. Entry barriers protect an incumbent firm from
competition by making it more difficult for firms to enter the market or for existing
firms to expand. Entry barriers can include, for example, the time, money, and
expertise needed to develop a competing product; the risk that such entry would fail
to recover the required investment; the costs to customers of switching providers;
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A merger that entrenches or extends a firm’s dominant position may also violate Section 1 or Section 2 of the
Sherman Act. See, e.g., United States v. Grinnell Corp., 384 U.S. 563 (1966) (acquisitions among the types of
conduct that may violate the Sherman Act). The various provisions of the Sherman, Clayton, and FTC acts each
have separate standards, and one may be violated when the others are not.
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See Emhart Corp. v. USM Corp., 527 F.2d 177, 182 (1st Cir. 1975).
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Cases use various terms to describe a firm with an already powerful position in a market. See, e.g., FTC v. Procter
& Gamble Co., 386 U.S. 568, 575 (1967) (“dominant position”); id. at 571 (“leading manufacturer”); United States
v. Aluminum Co. of Am., 377 U.S. 271, 278 (1964) (“leading producer”); Allis-Chalmers Mfg. Co. v. White Consol.
Indus., Inc., 414 F.2d 506, 524 (3d Cir. 1969) (“leading firm”); Fruehauf Corp. v. FTC, 603 F.2d 345, 353 (2d Cir.
1979) (“large supplier”); United States v. FCC, 652 F.2d 72, 103 (D.C. Cir. 1980) (“dominant firms”); id. (“leading .
. . firm”); Stanley Works v. FTC, 469 F.2d 498, 505 (2d Cir. 1972) (“dominant position”); Mo. Portland Cement Co.
v. Cargill, Inc., 498 F.2d 851, 866 (2d Cir. 1974) (“dominant firm”). Concern with entrenching or extending a
powerful position, however, does not depend on the precise term, and arises whether the firm has market power or
monopoly power. These Guidelines therefore use the term “dominant position” to refer to the position of those firms
for which antitrust law is concerned about extending or entrenching power through a merger.
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