The 2023 Merger Guidelines and Market Definition: Doubling Down or Folding?

Abstract

Disputes about market definition are often regarded to be dispositive of litigated merger cases. Yet the market definition process is illogical—circular at best but actually far worse because it distorts or discards much of the available information on a proposed merger’s effects. Against this background, the 2023 Merger Guidelines present a paradox. On one hand, they double down on market definition through what may be their most important change: tightening and augmenting the so-called structural presumption, under which high market shares are sufficient to presumptively block a merger. The importance of market definition is thereby elevated because one cannot know what market shares to use unless a market is defined. On the other hand, the 2023 Merger Guidelines’ longest segment—on market definition and market shares—demotes the familiar methods (including the hypothetical monopolist test) and expresses a clear preference for the use of direct evidence on a proposed merger’s effects. But direct evidence, as is well known, is a substitute for market definition, not a way to define a market in which market shares can then be calculated. This change thus disables the structural presumption. The analysis here identifies and deepens the resulting conundrum by elaborating the disconnect between the proper economic analysis of mergers and the market definition paradigm.