Transnationalized Markets On U.S.

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T h e I n f lu e n c e o f T r a n s n a tio n a liz e d M a rk e ts
on
U.S. M e r g e r R e v ie w
U lric h M e h le r
Institute o f Comparative Law

Faculty o f Law, McGill University
Montreal, Canada
August 2000
A thesis submitted to
the Faculty o f Graduate Studies and Research
in partial fu lfillm e n t o f the requirements
for the degree o f Master o f Laws
Ulrich Mehler, 2000
1*1
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Ab str a c t
This thesis examines the impact o f transnationalization on U.S. American merger review. It
commences by outlining the principles o f U.S. merger control, the notion of competition, and
effects to be prevented. The study then proceeds with an analysis o f transnationalization and
gives an evaluation o f its influence on firms, markets, and economic systems. The adjacent part
holds a description of significant merger decisions made by the U.S. authorities during the re
cent years thereby covering important markets. An analysis focussing on a possible inequality of
the treatment between mergers involving U.S. and foreign firms in order to meet exigencies
generated by transnationalization that are not congruent with the objective o f maintaining com
petition follows. The thesis concludes with an examination o f extraterritorial application o f U.S.
antitrust law, the problems generated thereby and the various suggestions produced for a solu
tion of the discrepancy between world-wide markets and enterprises and nationally confined
legal systems.
Re su m
Cette these propose une etude des consequences de la mondialisation economique sur le regime
juridique du controle des fusions opere par les autorites americaines. Letude debute par une
description des ptincipes generaux de ce regime et du concept de concurrence. Par la suite, nous
abordons la nature du phenomene de la mondialisation, ainsi que ses effets sur les entreprises,
les marches, et les systemes economiques. La partie subsequente contient une presentation des
principales decisions prises ces demieres annees par les autorites americaines dans les plus
grands secteurs de 1economie. Nous y etudions le traitement reserve aux entreprises americaines
par comparaison a celui alloue aux firmes etrangeres, en mettant en lumiere une certaine dis
parity Lobjectif de maintien dun environnement concurrendel pourrait avoir cede le pas a
dautres considerations, notamment la protection de lindustrie americaine. Dans le chapitre
final, nous portons une attention particuliere a letude de 1application extraterritoriale du droit
de la concurrence amercain. II sagira egalement detudier les voies et moyens dune possible
adaptation des systemes juridiques nationaux a un ordre economique desormais global.
II
ckn o w led g em en ts
First and foremost, I would like to express my thankfulness to Prof. Richard Janda, who,
despite the very tight schedule he constandy suffers from, always found the time to assist me
and to provide valuable advice. His experience and insight is deeply appreciated and was inesti
mably significant for the completion of this thesis. His lecture on Governmental Control of Business
proved to be a valuable compass for finding a topic and is gratefully acknowledged.
The completion o f this thesis is due to the efforts o f many people. The patient staff o f
McGills Nahum Gelber Law Library', the Howard Ross Management Library', and the McLennan-Redpath Library' who never complaint about my - sometimes strange - questions at the
oddest hours. Likewise, I would like to recognize the help o f Ginette van Leynseele and Melissa
Knock, giving valuable advice with regard to all administrative hurdles and caps that had to be
sailed around. A very special thanks goes to all those whose task it was to encourage me during
the realization o f this work: The Transadantic Cheering Team o f Friedrich & Barbara Falkenberg, Tanja Gerlach, Oliver Koster, Ingo Quast, Vera Rabe and Uta Schumann, as well as all the
dear companions who shared the experience o f an academic year in Montreal with me, most o f
all my Asian friend Eugene Lim.
I am indebted to Briony Whiting who took the considerable task to sift through my work
on the quest for style insufficiencies and grammatical errors. Finally, I am most appreciative of
the financial support provided by the McGill Universitys Judge Greenshield Memorial Scholarship
and its generous fee waiver policy. Without it, the completion o f this thesis would have been
seriously jeopardized.
III
Ta b l e O f C o n t e n t s
Introduction
Chapter 1 Overview O f U.S. Merger Control
A. The Notion O f Competition
I. Legal Basis
II. The Subject O f Protection
B. Merger Review In Practice
I. The Underlying Ideas And The Anticompetitive Effects To Be Prevented
II. The Reach O f Section 7 Clayton Act
III. Market Definition
1. The Product Market
2. The Geographic Market
IV. Assessing The Competitive Effects O f Mergers
1. Market Share And Concentration
2. Entry And Potential Competition
3. Innovation Issues
V. Defending Anticompetitive Mergers
1. Efficiencies And Synergies
2. Failing Firm, Failing Division, And Exiting Assets
VI. Vertical Integration
VII. Remedies
Chapter 2 The N otion O f Transnationalization Myths And Realities

A. The Development O f The Market Structures
B. The Nature O f Transnationalization
I. Transnationalization In Lieu O f Globalization
II. The Effects O f Transnationalization
1. Effects On Firms And Markets
2. Effects On Economic Systems And Nations
3. Effects On Merger Control
Reproduced with permission of the copyright owner. Further reproduction prohibited w ithout permission.
C hapter 3 Com petition V. Competitiveness? U.S. Merger Review In Practice

A. Domestic Mergers
I. Consumer Goods And Retail
32
32
32
1. Cardinal Health, Inc./Bergen Brunswick Corp. And McKesson Corp./AmeriSource Health Corp.
32
2. Staples, Inc. And Office Depot, Inc.
33
II. The Entertainment Industry: Sony Corp. O f America And LTM Holdings, Inc.
35
III. The Airline Industry: Northwest Airlines Corp. And Continental Airlines, Inc.
36
IV. Telecommunications: AT&T Corp. And Tele-Communications, Inc.
37
B. Review O f Mergers In Industries Encountering International Competition
39
I. Mergers O f Domestic Firms

1 . The
Oil Industry: Exxon Corp. And Mobil Corp.
39
39
2. The Metal Industry: Precision Castparts Corp. And Wyman-Gordon Company
42
3. The Aircraft Industry: Boeing Co. And McDonnell-Douglas Corp.
43
4. The Defense Industry
45
a) Martin Marietta Corp. And General Dynamics Corp.
45
b) Lockheed Martin Corp. And Loral Corp.
45
5. Innovation Markets
47
a) Microsoft Corp. And Intuit, Inc.
47
b) Silicon Graphics, Inc., Alias Research, Inc., And Wavefront Technologies, Inc.
48
II. Mergers Involving Non-American Firms

1 . The
Oil Market: British Petroleum p.l.c. And Amoco Corp.
50
50
2. The Stimulant Industry: Guinness p.Lc., Grand Metropolitan p.l.c., AndDiageo p.l.c. 52
3. The Metal Industry: Federal-Mogul Corp. And T&N p.Lc.
53
4. The Chemicals Industry: E. I. DuPont de Nemours & Co. And Degussa AG
55
5. Innovation Markets
57
a) Upjohn Co. And Pharmacia Aktiebolag
57
b) SNLA S.p.A. And Gambro
59
c) Ciba-Geigy Ltd. And Sandoz Ltd.
60
C hapter 4 - Analysis O f Instrumentalization
64
A. Analysis O f Perceptible Instrumentalization
64
I. Domestic Mergers On Domestic Markets
64
1.
Market Definition
64
2. Assessment O f Anticompetitive Effects

3. Entry Analysis
4. Efficiencies
5. Critique
II. U.S. Firms On Markets Under International Competition
1. Analysis In General
a) Market Delineation
b) Market Concentration
c) Entry Analysis
d) Assessment O f Anticompetitive Effects
(1) Innovation Markets
(2) Vertical Integration
2. Efficiencies Especially
III. Mergers Involving Non-U.S. Firms
1. Market Delineation, Concentration, And Market Shares
2. Assessment O f Anticompetitive Effects
3. Remedies
IV. Provisional Result
B. Further Problems
I. The Role O f Negotiated Solutions
1. Hart-Scott-Rodino And Its Effects
2. Administrative Discretion And Negotiated Solutions
3. Remedies
II. The Treatment O f Joint Ventures
III. Industrial Policy
1. Industrial Policy In The U.S. In General
2. Industrial Policy7And Merger Review
Chapter 5 International Regime

A. Extraterritorial Application O f Section 7 Clayton Act
I. Scope And Limitations
1. The Effects Doctrine
2. Restrictions O f The Effects Doctrine
II. The Enforcement Practice O f FTC And DOJ

III. Problems
B. The Internationalization O f Competition Policy
99
100
101
I. The Harmonization Approach
102
II. The Internationalization O f Antitrust Law
102
1. The WTO Proposals
103
2. The OECD Proposals
105
III. The Draft International Antitrust Code
106
IV. Bi- And Multilateral Agreements
108
V. Critique
110
Conclusion
Appendix
Table 1 - Decisions On Domestic Mergers
Table 2 Decisions On Mergers of U.S. Firms Facing International Competition
Table 3 Decisions Involving Non-U.S. Firms
114
XXX
XXX
XXXII
XXXIV
VII
B ib l io g r a p h
Le g is l a t io n
Australia
Australian Trade Practices A ct 1974, T AUSTL. ACTS P. 90 (6) (1979)
E u r o pe a n U n io n
Treaty Establishing the European Economic Community, Mar. 25*, 1957, as amended by the Single
European Act, [1987] O. J. L 169/1, [1987] 2 CMLR 741, as amended by the Treaty on Euro
pean Union, Feb. 7*, 1992, [1992] O. J. C 224/01, [1992] 1 CMLR 719
Emulation 4064/89 (EEC) of the Council concerning the Control ofMergers of Dec. 21, 1989, [1989] O.
J. L 395/1, as amended by Regulation 1310/97, [1997] O. J. L 180/1
U n it e d k in g d o m
Protection of Trading Interests Act 1980 (U.K.), 1980, ch. 11
U n it e d St a te s
46 U.S.C.S. Appx. 1706 (1987)
49 U.S.C.S. 11344(b) (1998)
Airline Deregulation A ct of 1978, Pub. L. No. 95-505, 92 Stat 1705
BancrupttyAct, 11 U.S.C.S. 1101-1174 (1988)
Bank Merger Act, 12 U.S.C.S. 1828 (1996)
Clayton Act, 15 U.S.C.S. 12 - 18 (1985); 19 - 27 (1991)
Export Trading Co. Act, 15 U.S.C.S. 4001-3, 4011-21 (1991)
Foreign Trade Antitrust Improvement Act, 15 U.S.C.S. 6a (1982), 45 (a) (3) (1991)
Foreign Sovereign Immunities A ct of 1976, 28 U.S.C.S. 1604 (1988)
Freedom ofInformation Act, 5 U.S.C.S. 552
FTC Act, 15 U.S.C.S. 41 ff. (1991)
Government Performance A n d Results A ct of 1993, Pub. L. No. 103-62,107 Stat. 285
InternationalAntitrust Enforcement Assistance Act of 1994, 15 U.S.C.S. 6201-6212 (1994)
National Research Cooperative A nd Production Act, 15 U.S.C.S. 4301-05 (1996)
Newspaper Preservation Act, 15 U.S.C.S. 1801-1804 (1996)
Omnibus Trade A n d Competitiveness A ct of 1988, Pub. L. No. 100-418,102 Stat. 1107
Sherman Act, 15 U.S.C.S. 1 - 7 (1985)
Webb-Pomerene Act, 15 U.S.C.S. 61-65 (1995)
VIII
The U.S.C.S. is a Federal Code published by Lawyers Cooperative Publishing, New York. The
citation o f the publisher in the footnotes is omitted.
J u r is p r u d e n c e
U.S. Su pr em e C o urt
Alfred DunhiU ofLondon v. Republic of Cuba, 425 U.S. 682 (1976)
American Banana Co. v. United Fruit Co., 213 U.S. 347 (1909)
Banco National de Cuba v. Sabbatino, 376 U.S. 398 (1964)
Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1 (1979)
Brown Shoe v. United States, 370 U.S. 294 (1962)
California v. American Stores Co., 495 U.S. 271 (1990)
Cargill, Inc. v. Montfort of Colorado, Inc., 470 U.S. 104 (1986)
Cherron U S A ., Inc. v. Natural Resource Defense Council, Inc., 467 U.S. 837 (1984)
Chicago Board of Trade v. United States, 246 U.S. 231 (1918)
ContinentalT. V. v. G TE Sylvania, Inc., 433 U.S. 36 (1977)
Eastman Kodak Co. v. Image Technical Sendees, Inc., 504 U.S. 451 (1992)
Harford Fire Insurance Co. v. State of California, 509 U.S. 764 (1993)
Timken Roller Bearing Co. v. United States, 341 U.S. 593 (1951)
United States v. E. I. DuPont de Nemours zF Co., 351 U.S. 377 (1956)
United States v. FalstaffBrewing Corp., 410 U.S. 526 (1973)
United States v. General Dynamics Corp., 415 U.S. 486 (1974)
United States v. Philadelphia Nat'L Bank, 374 U.S. 321 (1963)
United States v. Procter zF Gamble 386 U.S. 568 (1967)
U.S. F ed era l C ourts

AddamaxCorp. v. Open Software Foundation, Inc., 152 F.3d 40 (1 Cir. 1998)
Aluminum Corp. ofAmerica v. United States, 148 F.2d 416 (2nd Cir. 1945)
Blue Cross zF Blue Shield United of Wisconsin v. Marshfield Clinic, 65 F.3d 1046 (7th Cir. 1995)
Dr. Pepper/Seren-Up Cos., Inc. et aL v. FTC, 991 F.2d 859 (D. C. Cir 1993)
FTC v. Alliant Techystems, Inc., 808 F. Supp. 9 (D. D. C. 1992)
FTC v. Butterworths Health Corp. zF Blodgett Memorial Medical Center, 946 F. Supp. 1285 (W. D.
Mich. 1996), afPd., 121 F.3d 708 (6th Cir. 1997)
FTC v. Cardinal Health, Inc., Bergen Brunswick, Corp. v. McKesson Corp., AmeriSource Health Corp., 12
F. Supp. 2d 34 (D. D. C. 1998)
IX
F T C v. Great Lakes Chem. Corp., 528 F. Supp. 84 (N. D. 111. 1981)

FTC v. Staples, Inc. and Office Depot, Inc., 970 F. Supp. 1066 (D. D. C. 1997)
FTC v. Tenet Healthcare Corp., 17 F. Supp. 2d 937 (E. D. Mo. 1998)
F T C v. Uniiersity Health, Inc., 938 F.2d 1206 (11th Cir. 1991)
Industrial Investment Deielopment Corp. v. Mitsui zFCo., L td , 671 F.2d 876 (5th Cir. 1982)
InternationalAssociation ofMachinists v. Organisation of the Petroleum Exporting Countries, 649 F.2d
1354 (9th Cir. 1981)
Laker Airways v. Sabena Belgium World Airlines, 731 F.2d 909 (D. C. Cir. 1984)
Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287 (3rd Cir. 1979)
M CI Communications Corp. v. American Telephone and Telegraph Co., 708 F.2d 1081 (7th Cir. 1983)
Montreal Trading L id v. A M A X , Inc., 661 F.2d 864 (10th Cir. 1981)
N a tL Bank of Canada r. Interbank Card Ass. and Bank o f Montreal 666 F.2d 6 (2nd Cir. 1981)
Olin Corp. v. FTC, 986 F.2d 1295 (9th Cir. 1993)
Rothery Storage z r Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210 (D. C. Cir. 1986)
RSR Corp. v. FTC, 602 F.2d 1317 (9th Cir. 1979)
Timberlane Lumber Co. v. Bank ofAmerica N T eF SA ., 549 F.2d 597 (9th Cir. 1976)
United States v. A T z r T Corp. and Tele-Communications, Inc., No. 98-CV03170, Comments Relating
To Proposed Final Judgement And Response O f The United States To Comments (D. D.
C. March 26th, 1998)
United States v. A T z r T Corp. and Tele-Communications, Inc., No. 98-CV03170, Final Judgement (D.
D. C. Aug. 23rd, 1999)
United States v. Baker Hughes, Inc., 731 F. Supp. 3 (D. D. C. 1990), affd., 908 F.2d 981 (D. C. Cir.
1990)
United States v. Black zF Decker Manufacturing Co., 430 F. Supp. 729 (D. Md. 1976)
United States v. Eastman Kodak Co., 63 F.3d 95 (2nd Cir. 1995)
United States v. Engelhard Corp. etaL, 126 F.3d 1302 (11th Cir. 1997)
United States v. Long IslandJewish Medical Center, 983 F. Supp. 121 (E. D. N. Y. 1997)
United States v. Pilkingtonp.Lc., Civil Action No. 94-345, Proposed Final Judgement And Com
petitive Impact Statement 59 F.R. 30604 (N. D. Ariz. July 14th, 1994)
United States v. Rockford Memorial Corp., 717 F. Supp. 1251 (N. D. 111. 1989), affd., 898 F.2d 1278
(7th Cir. 1990)
United States v. Sprint Corp. andJoint Venture Co., Civil Action No. 95 CV 1304, Final Judgement
1996-1 Trade Cases 71300 (D. D. C. Aug. 24th, 1995)
United States v. Syify Enterprises, 712 F. Supp. 1386 (N. D. Cal. 1989)
United States v. U SA Waste Services, Inc., No. 97-1524, Proposed Final Judgement And Competi
tive Impact Statement 62 F.R. 47680 (W. D. Pa. Sep. 10th, 1997)
United States v. Western Electric Co. and A T zF T, 592 F.Supp. 846 (D. D. C. 1984)
X
U.S. Anchor Manufacturing, Inc. v. Rule Industries, Inc., 7 F.3d 986 (11th Cir. 1993)
A d m in i s t r a t i v e D e c i s i o n s & P u b l i c a t io n s
D e c is io n s
Commission Decision 97/816 o f July 30th, 1997, [1997] O. J. L 336/16 ,cBoeing/McDonnellDouglas

In the matter o f ABB A G andAAB AG , FTC File 991-0040, Complaint o f April 14th, 1999
In the matter o f American Home Products Corp., FTC File 941-0116, Decision And Order o f April
14th, 1995
In the matter o f B. F. Goodrich et aL, FTC Docket No. C-9159, Final Order o f March 15th, 1988,
53 F.R. 12379
In the matter o f British Petroleum Co. p.Lc., Amoco Corp., BP Amoco p.Lc., FTC File No. 981-0345,
Complaint of April 19th, 1999
Decision And Order o f April 19th, 1999
Statement o f Chairman Robert Pitofsky and Commissioners Sheila F. Anthony and Mozelle
W. Thompson
Statement o f Commissioner Orson Swindle, Concurring in Part, Dissenting in Part
In the matter o f Ciba-Geigy L td, Ciba-Geigy Corp., Chiron Corp., Sando~ Ltd, Sando~ Corp., and No
vartis A G , FTC File No. 961-055, Complaint of March 24th, 1997
In the matter o f Ciba-Geigy L td, Ciba-Geigy Corp., Chiron Corp., Sando~ Ltd, Sando~ Corp., and No
vartis A G , FTC File No. 961-055, Decision And O rder o f March 24th, 1997
In the matter o f Ciba-Geigy Ltd, Ciba-Geigy Corp., Chiron Corp., Sando~ Ltd, Sandoi~ Corp., and No
vartis A G , FTC File No. 961-055, Separate Statement o f Chairman Robert Pitofsky, and
Commissioners Janet D. Steiger, Roscoe B. Starek III., and Christine Varney
In the matter o f Degussa Aktiengesellschaft and Degussa Corp., FTC File No. 971-0118, Complaint o f
June 10th, 1998
In the matter o f Degussa Aktiengesellschaft and Degussa Corp., FTC File No. 971-0118, Decision
And Order o f June 10th, 1998
In the matter o f Dell Computer Co., FTC File No. 931-0097, Consent Agreement and Analysis To
Aid Public Comment o f Nov. 22nd, 1995,60 F.R. 57870
In the matter o f Digital Equipment Corp., FTC File No. 981-0040, Complaint o f April 23rd, 1998
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In the matter o f Exxon Corp. and Mobil Corp., FTC File No. 991-0077, Complaint of Nov. 13th,
1999
XI
In the matter o f Exxon Corp. and Mobil Corp., FTC File No. 991-0077, Analysis To Aid Public
Comment And Commissioner Statements o f January' 18th, 2000, 65 F.R. 2618
In the matter o f Exxon Corp. and Mobil Corp., FTC File No. 991-0077, Separate Statement o f
Commissioner Orson Swindle o f January' 18th, 2000, 65 F.R. 2627
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4th, 1998
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der of Dec. 9th, 1998
In the matter o f General Mills, Inc., FTC File No. 961-0101, Analysis To Aid Public Comment o f
Jan. 15th, 1997, 62 F.R. 2162
In the matter o f Guinnessp.Lc., Grand Metropolitan p.Lc., and Diageop.Lc., FTC File No. 971-0081,
Final Consent o f April 21st, 1998
Complaint o f April 17th, 1998
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in Part of April 17th, 1998
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To Aid Public Comment o f Dec. 17th, 1999, 64 F.R. 71141
In the matter of Insilco Corp., FTC Docket No. C-3783, Complaint o f Jan. 27th, 1998
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lic Comment o f Sep. 23rd, 1997, 62 F.R. 49687
In the matter o f LockheedMartin Corp., FTC File No. 961-0026, Complaint of Sept. 19th, 1996
In the matter o f Lockheed Martin Corp., FTC File No. 961-0026, Proposed Agreement And
Analysis To Aid Public Comment of April 29th, 1996, 61 F.R. 18732
In the matter o f Mahle GmbH; Mahle, Inc.; Leie GmbH; Lete, Inc., Proposed Consent Agreement
o f March 7th, 1999, 62 F.R. 10566
In the matter o f Martin Marietta Corp., FTC Docket No. C-3500, Consent Order o f July 20th,
1994, 59 F.R. 37045
In the matter o f Martin Marietta Corp., FTC Docket No. C-3500, Proposed Consent Agreement
And Analysis To Aid Public Comment o f April 12th, 1994, 59 F.R. 17379
In the matter o f Precision Castparts Corp. and Wyman-Gordon Co., FTC File No. 991-0240, Com
plaint of Nov. 9th, 1999
In the matter o f Precision Castparts Corp. and Wyman-Gordon Co., FTC File No. 991-0240, Decision
And Order o f Dec. 17th, 1999
In the matter o f Shaws Supermarkets, Inc.;J. Sainsburyp.Lc.; Star Markets Holdings, Inc., FTC File
No. 991-0075, Decision And Order of April 5th, 2000
In the matter o f Shell O il Co. and Texaco, Inc., FTC File No. 971-0026, Analysis To Aid Public
Comment o f Dec. 12th, 1997, 62 F.R. 67868
XII
In the matter of Shell Oil Co. and Texaco, Inc., FTC File No. 971-0026, Final Consent of April
22nd, 1998
In the matter o f Silicon Graphics, Inc., FTC File No. 951-0064, Proposed Consent Agreement
And Analysis To Aid Public Comment o f July 5th, 1995, 60 F.R. 35032
In the matter o f SN IA S.pA ., FTC File No. 991-0095, Complaint o f July 28th, 1999
In the matter o f SN IA S .p A , FTC File No. 991-0095, Decision And Order o f July 28th, 1999
In the matter o f The Boeing Company and McDonnell Douglas Corp., Statement o f Chairman Robert
Pitofsky et al. o f July 1, 1997, 5 Trade Reg. Rep. (CCH) J 24295 (1997)
In the matter o f Time Warner, Inc., Turner Broadcasting Systems, Inc., Tele-Communications, Inc., and
Liberty Media Corp., FTC File 961-0004, Complaint o f Feb. 3rd, 1997
In the matter o f The Upjohn Co. and Pharmacia Akiiebolag FTC File No. 951-0140, Complaint o f
Feb. 8th, 1996,121 F.T.C. 44
In the matter o f The Upjohn Co. and Pharmacia Aktiebolag, FTC File No. 951-0140, Agreement
Containing Consent Order And Analysis T o Aid Public Comment of Nov. 7th, 1995, 60
F.R. 56153
In the matter o f Wright Medical Technology, FTC File No. 951-0015, Proposed Consent Agree
ment And Analysis To Aid Public Comment o f Jan. 4th, 1995,60 F.R. 46001
United States v. A T Z~ T Corp. and Tele-Communications, Inc., No. 98-CV03170, Complaint o f Oct.
12*, 1998
United States v. A T z r T Corp. and Tele-Communications, Inc., No. 98-CV03170, Competitive Impact
Statement o f Oct. 12th, 1998
United States v. Microsoft, Inc., Civ. No. 98-1232, Complaint o f May 18th, 1998
United States v. Microsoft Corp. and Intuit, Inc., No. 95CV-1393WRO, Complaint o f April 27th, 1995
United States v. Northwest Airlines Corp. and Continental Airlines, Inc., Civil Action No. 98-74611,
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o f April 16*, 1998
XIII
Unless otherwise indicated all decisions o f the Antitrust Division o f the U.S. Department of
Justice are available online: <http://www.usdoj.gov/atr/cases.htm> , the decisions o f the Fed
eral Trade Commission are available online: < http://www.ftc.gov/os/index.htm> (date ac
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XTV
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the Government of the United States, Dec. 17th, 1992, Can. T. S. 1994 No. 2, 32 I.L.M. 289
Set of Principles and Rulesfor the Control of Restrictive Business Practices, GA Res., 35th Sess., UN Doc.
T D /R B P/10 (1980)
Treaty ofAsuncion, March 26*, 1991 (1991) 30 IX.M. 1034
O t h e r M a t e r ia l
Max-Planck Institute o f Munich, Draft InternationalAntitrust Code, 64 Antitrust & Trade Reg.
Rep. (BNA) No. 1628 (Aug. 16th, 1993) (Spec. Supp.)
XXIII
Gl o s s a r y O f A
cronym s
An
A b b r e v ia t io n s
Admin. L. Rev.
Administrative Law Review
affd.
affirmed
AG
Aktiengesellschaft
Am. J. IntT L.
American Journal o f International Law
Annals Am. Acad. PoL & Soc. Sci.
Annals o f the American Society o f Po

litical & Social Science
Antitrust Bull.
Antitrust Bulletin
Antitrust L. & Econ. Rev.
Antitrust Law & Economics Review
Antitrust L. J.
Antitrust Law Journal
Ariz.
Arizona
AUSTL.
Australia
B. U. L. Rev.
Boston University Law Review
Baylor L. Rev.
Baylor Law Review
BNA
Bureau of National Affairs
Bus. Law.
Business Lawyer
Cal.
California
Can. T. S.
Canada Treaty Series
CARB
California Air Resources Board
CCH
Commerce Clearing House
CEO
Chief Executive Official
CGA
chemical grade alumina
Chap.
chapter
Chi.-Kent. L. Rev.
Chicago-Kent Law Review
Cir.
Circuit
CMLR
Common Market Law Reporter
Co.
company
Colum. Bus. L. Rev.
Columbia Business Law Review
Conn. L. Rev.
Conneticut Law Review
Corp.
corporation
D. C. Cir.
District of Columbia Circuit
D. D. C.
District Court o f the District o f Colum

bia
D.
District Court
XXIV
DePaul L. Rev.
DePaul Law Review
DIAC
Draft International Antitrust Code
DOC
Department o f Commerce
DOD
Department o f Defense
DOJ
Department o f Justice
DSU
Understanding on Rules and Procedures

Governing the Setdement o f Disputes
Duke L. J.
Duke Law Journal
E. D.
Eastern District
e-&
EAS
for example
electronic article surveillance
E-commerce
electronic commerce
ed.
editor/edition
EEC
European Economic Community
et. al.
and others
EU
European Union
F. Supp.
Federal Supplement
F., F.2d, F.3d
Federal Reporter (2nd, 3rd series)
F.R.
Federal Register
F.T.C.
Federal Trade Commission Decisions
FAA
Federal Aviation Administration
FCC
Federal Communications Commission
FDA
Food And D rug Administration
ff.
and following
fn.
footnote
FOIA
Freedom o f Information Act
Food & Drug L. J.
Food & Drug Law Journal
Fordham Corp. L. Inst
Fordham Corporate Law Institute
Fordham Intl. L. J.
Fordham International Law Journal
Fordham L. Rev.
Fordham Law Review
FTAIA
Foreign Trade Antitrust Improvement

Act
FTC
Federal Trade Commission
GATS
General Agreement On Trade In Services
XXV
GATT
General Agreement On Tariffs And

Trade
Geo. L. J.
Georgetown Law Journal
George Mason L. Rev.
George Mason Law Review
George Wash. J. IntT L. & Econ.
George Washington Journal o f Interna

tional Law & Economics
GmbH
Gesellschaft mit beschrankter Haftung
GNP
Gross National Product
Hastings L. J.
Hastings Law Journal
HHI
Herfindahl-Hirschmann-Index
Hous. J. I n ti L.
Houston Journal o f International Law
HSR-Act
Hart-Scott-Rodino Antitrust Improve

ment Act
HSV-tk
herpes simplex virus-thymidine kinase
i. e.
that means
I.L.M.
International Legal Materials
ICPO
International Competition Policy Office
ibid.
ibidem
111.
Illinois
Inc.
incorporated
I n ti Lawyer
International Lawyer
I n ti Org.
International Organization
I n t i Pol. & Ges.
Internationale Politik & Gesellschaft
I n ti Trade Rep.
International Trade Reporter
J-
journal
J. I n t i L. Bus.
Journal o f International Law & Business
J. Mar. L. Rev.
John Marshall Law Review-
J. World Trade
Journal o f World Trade
L. & Poly I n ti Bus.
Law & Policy7in International Business
L.J.
Law Journal
L. Rev.
Law Review
Ltd.
Limited
M & As
mergers and acquisitions
MBD
million barrels per day
Md.
Maryland
XXVI
Mercer L. Rev.
Mercer Law Review
Mercosur
Southern Common Market
Mich. J. Ind. L.
Michigan Journal o f International Law
Mich. L. Rev.
Michigan Law Review
Mich.
Michigan
Minn. J. Global Trade
Minnesota Journal o f Global Trade
MLAT
Mutual Legal Assistance Treaty
Mo.
Missouri
MoU
Memorandum o f Understanding
MVS
m inim um
N. C. L. Rev.
North Carolina Law Review
N. D.
Northern District
N. V.
Naamloze Vermootschap
N. Y. U. L. Rev.
New York University Law Review
N. Y.
New York
NAFTA
North American Free Trade Agreement
N ad. L.J.
National Law Journal
natl.
national
NIST
National Institute o f Standards and

Technology7
no.
number
NRCPA
National Research Cooperative and Pro

duction Act
O .j.
Official Journal
OECD
Organization For Economic Coopera

tion And Development
OEM
original equipment manufacturer
Oreg. L. Rev.
Oregon Law Review
OTP
Office o f Technological Policy
p.l.c.
Public Limited Company
Pa.
Pennsylvania
Pac. Rim L. & Polv. J.
Pacific Rim Law & Policy7Journal
para.
paragraph
PC
personal computer
PCS
personal communications services
viable scale
XXVII
pew
pure consumer welfare

personal finance
PLI/Corp.
Practising Law Institute Corporate Law

and Practise Course Handbook Series
Polv. Directions for Global Merger Rev.
Policy Directions for Global Merger

Review
Pub. L.
Public Law
Pub.
publication
Quart. J. Econ.
Quarterly Journal o f Economics
R&D
research and development
Rev.
Review
rev. ed.
revised edition
RIW
Recht der intemadonalen Wirtschaft
S. A.
societe anonyme
S.p.A.
Societa per azioni
Sec.
section
SETA
engineering, technical assistance, and

support
SGA
smeltered grade alumina
SME
small and medium-sized enterprises
spec.
special
SSNIP
small but significant non-transitory in

crease o f price
Stan. L. & Poly. Rev.
Stanford Law & Policy Review
Stat.
Statutes at Large
Supp.
supplement
TA
Technical Administration
Tex. Inrt. L. J.
Texas International Law Journal
Trade Reg. Rep.
Trade Regulation Reporter
Transnatl. L. & Contemp. Probs.
Transnational Law & Contemporary

Problems
TRIPS
Agreement On Trade-Related Aspects o f

Intellectual Property Rights
TV
television
University o f Kansas Law Review
XXVIII
U. Miami Bus. L. Rev.
University o f Miami Business Law Re

view
U. N. Doc.
Documents o f the United Nations O r

ganization
U.N.T.S.
United Nations Treaty Series
U.S.C.S.
United States Code Service
v.
versus
Vand. J. Transnatl. L.
Vanderbilt Journal o f Transnational Law
VCR
video cassette recorder
VHS
video home system
W. D.
Western District
Wash. & Lee L. Rev.
Washington & Lee Law Review
wcss
Western Systems Coordinating Council
WLMR
William Mitchell Law Review
Wodd Competition L. & Econ. Rev.
Wodd Competition Law & Economy

Review
WSI Mitteilungen
Mitteilungen des Wirtschafts- und

Sozialwissenschaftlichen Institutes in der
Hans-Bockler-Stiftung
WTO
World Trade Organization
WuW
Wirtschaft und Wettbewerb
XXIX
I n t r o d u c t io n
The world currently experiences a merger wave that happens at a rapid and breathtaking
gait. Each week there are announcements of new mergers, many o f which appear to restructure
industries or create enterprises o f a size that was unimaginable a few years ago. It seems almost
as if a raring merger madness, topping a dramatic world-wide corporate consolidation that has
been gaining momentum through much of the last ten years.1 At the same time markets have
been expanding; customers o f even- size and financial strength can satisfy their demands with a
variety o f products and services o f world-wide origin. Markets that had been relatively un
harmed by internationally operating exporters for decades like the U.S. now face fierce compe
tition from abroad. To all this dynamism the emergence o f entirely new businesses is added;
multinational firms vigorously compete for being the inventor of the next generations of com
puter chips or medical treatments. Battles are fought over markets that still are to come into
existence. Whereas some enterprises intensely take part in the market expansion, others, less
flexible or depending on less mobile assets, see themselves declining, due to the exposure to
intensified competitive pressure. Firms capable o f operating globally can play the sites out
against one another, picking-and-choosing the one that offers the most attractive conditions.
The others call for protection measures against the foreign intruders. Against this background
of cross-border activity, legal systems whose task it is to ensure the maintenance o f a system o f
functioning competition and that still are confined to the traditional national structures, face a
two-fold challenge: (1) they want to offer an environment highly attractive for global players
investments and (2) they want to cushion the impact o f international competition on the do
mestic industry, if possible by enhancing its competitiveness. This, however, often collides with
the exigencies of competition.
An economic system that feels itself hit hardest by the recent development is the wodds
most important single economy the United States. Its allegedly most rigorous antitrust en
forcement is confronted with the choice between competition and competitiveness. This thesis
is intended to analyze the impact o f market expansion and the wave o f acquisitions on U.S.
merger review. The examination shall be based on the initial hypothesis that U.S. merger review
has indeed come off the straight and narrow path and has been instrumentalized in order to
protect the domestic industry, prop up its international competitiveness, and offer an attractive
Actual Merger Transaction Value Counter, online: Mergerstat <http://www.mergerstat.com> (date ac

cessed: Aug. 20th, 2000).
1
environment for foreign investors at the expenses o f pure competition. For the orientation to
the review practice a profound examination o f jurisprudential merger review and its deviations
from the administrations position is foregone to a high extent. References to court decisions,
however, shall be made where appropriate. International competition almost exclusively in
volves entire nations, i. e. the U.S. as a whole. For that reason the focus in this thesis is on fed
eral merger review, with only occasional reference to the enforcement within individual states.
Chapter 1 sets out the legal and institutional framework o f U.S. merger review as inter
preted by the responsible authorities and expressed in their publications. It also sheds light on
the currendy prevalent concept of competition and its objectives. Finally, it summarizes the
steps o f the authorities approach toward mergers and acquisitions, including the defenses the
parties to a challenged transaction have at their disposal. Chapter 2 is meant to unfold in detail
the problems that are imposed on U.S. merger review by the development described above an
occurrence that is commonly known as globalization. It attempts to render concrete this
somewhat vague notion by trying to delimit its actual dimensions and to explain its pattern of
development. Following this explanation, the subsequent chapters, 3 and 4, contain the core
analysis as to whether globalization has led to an instrumentalization o f U.S. merger review.
Chapter 3 outlines in essence a number o f the most important merger challenges o f the recent
years, broadening the perspective from purely domestic mergers to transactions involving
international markets and foreign enterprises. Furthermore, the perspective is shifted from tra
ditional and concrete products to more intangible ones. Resting on the results of the preceding
chapter, chapter 4 examines whether a different treatment o f domestic and international merg
ers is detectable. It also scrutinizes some special aspects o f U.S. merger review particularly prone
to instrumentalization, such as the role o f efficiencies and the procedure o f merger review.
Further widening the perspective, the final chapter deals with the internationalization o f com
petition laws as a result o f global markets, in particular with extraterritorial application o f U.S.
antitrust law. The thesis ends by giving an outline o f the attempts and suggestions made to miti
gate the problems and frictions imposed on merger control by globalization, in particular with
regard to the proposals for the establishment o f an international antitrust law regime. The thesis
concludes with an evaluation o f the practicability and the probable prospects for further devel
opment of these proposals.
2
C h a p te r 1 - O v e r v ie w O f U S . M e r g e r C o n t r o l
A. T h e N o t i o n O f C o m p e t i t i o n
One way o f expressing the predominant goal o f U.S. American merger review is to protect
competition from harmful structural changes. Charged with merger review on the federal level
are the Antitrust Division of the Department of Justice2 and the Federal Trade Commission.5
I.
L e g a l B asis
These authorities will review mergers, acquisitions, and joint ventures4 to determine
whether they violate Section 7 o f the Clayton Act.3 Section 7 prohibits a corporation engaged
in commerce from acquiring the stock or share capital or assets o f another corporation where
the effect of the acquisition may be substantially to lessen competition, or to tend to create a
monopoly. Section 7 does not require proof that a merger or other acquisition has caused harm
to competition. All that is necessary is that the merger create an appreciable danger o f such con
sequences in the future.6 While Sections 1 and 2 of the Sherman Act and Section 5 o f the FTC
Act8 may also be implicated, Section 7 Clayton Act is the primary7 regulation dealing with M &
As. Nonetheless, all these regulations are fairly clear in indicating that they protect competition
as an absolute value, its harm not to be weighed against the benefits o f other social desirabil
lties.
Besides, the Agencies issued Merger Guidelines in 199210 which were partially revised in
1997.11 The Guidelines are the Governments major analytical framework for determining when
an acquisition may substantially to lessen competition or tend to create a monopoly in violation
hereinafter DOJ.
hereinafter FTC.
hereinafter M & As.
15 U.S.C.S. 5 18 (1985).
By referral to the debates preceeding the enactment of the Clayton Act in 1914 it had often been stated that
the provision aims to prevent harm to competition by concentrations in its incipiency. For a recent state
ment see e. g. California v. American Stores Co., 495 U.S. 271, 275 (1990).
15 L'.S.C.S. 1,2(1985).
15 U.S.C.S. 45(1991).
Sam D. Johnson & A. Michael Ferrill, Defining Competition: Economic Analysis And Antitrust Decisionmaking (1984) 36 Baylor L. Rev. 583 at 584. In addition, there are specific statutes that apply only to certain
industnes such as the Bank Merger Act, 12 L.S.C.S. 1828 (1996); the Staggers Bail Act, 49 U.S.C.S. 11344(b)
(1998); the Newspaper Preservation A ct, 15 U.S.C. 1801-1804 (1996); and die Shipping A ct of 1984, 46 U.S.C.S.
Appx. 1706 (1987).
U.S. Department o f Justice & Federal Trade Commission, Horizontal Merger Guidelines, 4 Trade Reg. Rep.
(CCH) 13104 (1992) [hereinafter 1992 Horizontal Merger Guidelines or Guidelines].
U.S. Department o f Justice & Federal Trade Commission, Horizontal Merger Guidelines, Sec 4, (rev. ed. 1997), 4
Trade Reg. Rep. (CCH) H 13104 at 20513 - 11 to 13 (1997).
o f Section 7; they are not, however, binding on the courts. Nonetheless, they represent a signifi
cant milestone in coordination and cooperation between the Agencies, as well as an evolution
ary development building on the basic principles o f the 198212 and 198413 Merger Guidelines.14
Thus they are well respected by the courts, which often refer to them and to their underlying
ideas.15
I I . T h e S u b j e c t O f P r o t e c t io n
Section 7 Clayton Act, which refers directly to the notion o f competition, creates - as do
all U.S. American antitrust provisions something o f a puzzle, as none provides a definition o f
this protected subject16 Compared to this, the number o f attempts by analysts to define compe
tition is immense, and any contention that a certain definition has prevailed as commonly ac
cepted would be inaccurate.1 However at least a specific consensus on some central features o f
competition can be detected. In economic theory perfect competition is said to exist under
the following conditions: (1) there are no barriers to the entry o f new firms and resources arc
free to move between markets; (2) all market participants have equal (perfect) knowledge of all
relevant market facts; (3) producers realize all cost and benefits o f production; and (4) there is
continuous divisibility o f inputs and outputs.18 Yet antitrust regulations never explicidy address
these or other essential components o f competition, but rather direct attention to the question
of what kind o f market structure or behaviour violates competition and what is still tolerable.
Put another way, the definition o f competition in practice derives in large part from the defini
tion o f its infringement.
In that respect for the field o f M & As, one can discern several phases o f administrative en
forcement characterized by an increasingly tolerant approach to infringement. After a period of
high scepticism following the Celler-Kefauver-Amendment of the Clayton Act in 1950, the U.S.
Supreme Court introduced a more liberal approach with its decisions in United States v. General
14
15
16
r
18
U.S. Department o f Justice, Merger Guidelines, 4 Trade Reg. Rep. (CCH) ^ 13102 (1982) [hereinafter 1982
Merger Guidelines].
L'.S. Department o f Justice, Merger Guidelines, 4 Trade Reg. Rep. (CCH) 13103 (1984) [hereinafter 1984
Merger Guidelines].
-Man B. Momson, Fundamentals O f American Lon (Oxford: Oxford University Press, 1996) at 4.
see e.g. Cargill Inc. v. Montfort of Colorado, Inc., 470 U.S. 104,114 (1986).
see S. D. Johnson & A. M. Ferrill, supra note 9 at 585.
ibid at 587.
Phillip Areeda & Donald Turner, Antitrust, vol. 1 (Boston: Little, Brown, 1977) 402 at 268-69 [hereinafter
Antitrust, vol. 1].
Dynamics Corp. when it held that market share was not the only significant factor, and that the
question of whether the acquired firm would have to leave the market if the merger was en
joined was also relevant3 Furthermore, in Continental T. V. v. G TE Sylvania, Inc.21 the Court
refused to find that a decrease in vertical competition (intrabrand) for the purpose o f maintain
ing horizontal competition between different production chains (interbrand) gave rise to a justi
fied enforcement action.22
An even more dramatic change in attitude occurred within the federal administration. Hav
ing maintained a strict approach throughout several decades, the beginning o f President
Reagans term in office saw a turn o f the tide which found its expression in the 1982 Merger
Guidelines of the DOJ.23 This marked the beginning o f the relevance of the allocation o f re
sources, i. e. the idea that a market structure allowing uni- or collateral increases in prices to a
supracompetitive level and decreases in output and quality meant at the same time suboptimal
use o f the resources available.24 Setting aside some changes in the rigor o f enforcement, this
approach prevailed until the time o f the Clinton Administration.23
The theoretical basis for the described change was concocted by the Chicago School.
This term is less a name for a homogeneous school o f thought than for a conglomerate o f theo
ries that share two central ideas.26 First, the economy should as far as possible be free from in
terference by the state2 , and second, competition is, after all, a comprehensive notion for eve
rything from which the consumer profits: sufficient innovation, low prices, high quality o f
goods and services, and a rich choice.28 The major objective o f any competition policy, there-
415U.S. 486 (1974).

ibid.
433 L\S. 36 (1977).

ibid
1982 Merger Guidelines supra note 12.

Kevin Arquit, Terspectives On The 1992 U.S. Government Horizontal Merger Guidelines (1992) 61 Anti
trust L. J. 121 at 122.
Meinrad Dreher, Die US-amerikanischen Merger Guidelines von 1992: Kartellrecht jenseits der Rea
ganomics? [1995] RIW 376 at 378.
Arthur Austin, Antitrust Reaction To The Merger Wave: The Revolution v. The Counterrevolution (1988)
6 6 N. C. L. Rev. 931 at 946 describes the Chicago Shool as ideological alliance between lawyers and econo
mists.
This exigenq1 is an adaptation o f the neoliberal approach, see generally Milton Friedman, Essays In Positive Eco
nomics (Chicago: University o f Chicago, 1953) at 117 ff.
Robert Bork, The Antitrust Paradox'A Policy A t War With Itsejf (New York: Basic Books, 1978) at 59 ff.; S. D.
Johnson & A. M. Ferrill, supra note 9 at 611. Allocative efficiency is - theoretically - optimized in a perfectly
competitive environment, i. e., when the market price is a given parameter to all producers they all adapt the
amount o f units to an equilibrium where the market price equals the marginal cost. When resources are
freely mobile between markets, price will be equal to marginal cost in all markets, because higher-retum mar-
5
fore, is the realization o f pure consumer welfare (pew) to the highest degree possible.29 This
degree is measured by efficiency which itself is composed o f three elements: (1) allocative effi
ciency referring to the optimal use o f resources in a macroeconomic scope30, (2) the produc
tive efficiency referring to the relation between input and output o f a single firm31, and (3) dy
namic efficiencies referring to the consequence that, on the basis o f allocative and productive
efficiencies, the saved resources will be used for investment and innovation, that these two
therefore increase.32 The latter component principally consists o f the ability o f a firm to offer
products that are accepted by the demand side of the market. Productive efficiency is expressed
by the relative success o f a firm on the market observable when regarding its market share.33
The decisive aspect of this perspective for merger review lies in the fact that the economic ideal
is not linked to any degree o f market ^concentration.34 On the contrary, if the market share
directly reflects the productive efficiency o f a firm, its increase is in principle to be appreci
ated.35
Based on this understanding of competition, U.S. merger review can tolerate a high degree
o f market concentration.36 The potential o f M & As to jeopardize competition is not attributed
to crossing a particular threshold, but to the probability that the merged firms engage in prac
tices of raising prices and reducing output and/or quality thereby putting optimal allocation of
resources at risk.3 Despite these seemingly clear objectives, it must be observed that the con-
35
kets will draw resources away from markets offering lower returns, thereby expanding aggregate output in the
higher-retum market until pnee is restored to competitive levels.
In principle, the introduction o f the Chicagoan ideas meant a shift from the general idea o f preventing the
accumulation o f economic power to the implementation o f efficiency, Antitrust, vol. 1, supra note 18, 402bl
at 269, f 403b at 271.
Herbert Hovenkamp, Antitrust Policy After Chicago" (1985) 84 Mich. L. Rev. 213 at 239. The scale used is
the sum o f consumer and producer profit Both quantities are optimized when at a certain development o f
supply and demand a level o f output is reached on which market pnee and long term marginal cost converge.
ibid at 238.
Joseph. P. Tomain, Amencan Regulatory Policy: Have We Found The Third Way? (1998) 48 U. Kan. L
Rev. 829 at 853
R. Bork, supra note 28 at 105-06.
Erhard Kantzenbach & Konstanze Kinne, Nationale ZusammenschluGkontrolle und Internationale
Wettbewerbsfahigkeit von Untemehmen in festschrift for Ingo Schmidt, Jom Kruse, ed., Wettbewerbspolitik im
Spannungsfeld nationaler und intemationaler Karteiirccbtsordnungen (Baden-Baden: Nomos, 1997) 67 at 70.
R. Bork, supra note 28 at 192-93. Less capacity to violate competition is held by non-honzontal M & As which
do not affect market concentration and are deemed to generate a high amount o f efficiencies. The notions
horizontal, non-horizontal, vertical, and conglomerate refer to the relation o f the product markets
the merging parties are - as separate firms - active on. Roughly speaking, a merger between firms that offer
the same or similar products is termed horizontal. A vertical merger occurs between firms that are positioned
on different stages o f a production chain such as a supplier o f raw material and a manufacturer whereas con
glomerate M & As are those between firms acting on unrelated markets.
R. Bork, supra note 28 at 228; but see J. P. Tomain, supra note 32 at 853 who correctly stresses the fact that
despite the theoretical truth o f this foet, the accumulation o f market shares and market power is still the
dominant driving force behind aggressive mergers.
1992 Merger Guidelines, supra note 10 sec. 0.1; A. Austin, supra note 26 at 946.
6
cept o f competition in U.S. antitrust law remains fairly amorphous. There is an ongoing discus
sion about its nature and the ways to protect it For this reason antitrust law and the review o f
mergers are never static.3
B.
M e r g e r R e v ie w I n P r a c t ic e
I.
T h e U n d e r l y in g I d ea s A n d T h e An t i c o m p e t i t i v e E f f e c t s T o B e P r e v e n t e d
As competition in a sense o f optimal allocation o f resources is likely to be distorted by a

firms ability to unduly affect a market, U.S. merger analysis aims to identify mergers that are
likely to create or enhance market power.39 In this respect, the analytical framework used by the
Guidelines is only a means to an end: The process o f assessing market concentration, potential
adverse competitive effects, entry, effidenq7 and failure is a tool that allows the agency to an
swer the ultimate inquiry' in merger analysis: whether the merger is likely to create or enhance
market power or to facilitate its exercise.*0 Section 2 o f the 1992 Merger Guidelines describes
in greater detail the manner in which mergers may lead to higher prices or the loss o f other
forms o f competition. In particular, the Guidelines discuss both unilateral and coordinated po
tential anticompetitive effects.41
Through tacit or express coordination firms may pursue strategies that are harmful to con
sumers and that are profitable for each firm only as a result o f the accommodating reactions o f
other competitors. In its simplest manifestation, coordination may entail a decision to follow7an
unjustified price increase initiated by the market leader rather than maintaining current prices
and battling for an increased market share. However coordination needs not involve complex
terms but may, instead, follow simple terms such as a common price, fixed price differentials,
stable market shares, or customer or territorial restrictions.42 The Guidelines further explain
that successful coordinated interaction entails (1) reaching terms o f coordination that are profit
able to the firms involved; (2) the ability to detect deviations from those terms; and (3) the abil
ity to punish such deviations.43 The importance o f detection and punishment derives from the
inherent instability of cartels. It is always more profitable for a firm to cheat on a cartel agree
ment than to abide by the agreement, as long as the firm is not caught and punished. Successful
38
S. D. Johnson & A. M. Ferrill, supra note 9 at 487.
39
ibid.
40
1992 Merger Guidelines, supra note 10 sec. 0.2.
7,1
ibid secs. 2 . 1, 2 2 .
ibid sec. 1 1 1 .
41
7
coordination, therefore, requires that deviations from any terms o f coordination be detectable
and punishable, so that coordinating firms find it in their interests to abide by the terms o f co
ordination. Thus the Guidelines state that an effective scheme o f coordination requires that
deviations or cheating be deterred by a credible threat of punishment.44
In addition to the lessening o f competition through coordinated interaction, the Guidelines

also recognize that, following a merger, the merged firm may find it profitable to unilaterally
raise prices and suppress output45 Two theories o f unilateral anticompetitive harm are set out.
First, consider a market for differentiated products, in which buyers regard the products o f the
merged entities as particularly close substitutes for one another. If the merged entity raises the
price o f product A, some of the sales loss due to the price rise would be diverted to the com
panys newly acquired product line, product B. [Cjapturing such sales loss through merger may
make the price increase profitable even though it would not have been profitable premerger.46
The anticompetitive effect falls upon the buyers who regard the merging firms products as par
ticularly close substitutes, and it does not require the cooperation o f rivals. A second theory
relates to markets in which products are relatively undifferentiated, and capacity primarily dis
tinguishes firms and shapes the nature o f their competition. Suppose that a merger creates a
firm with a substantial market share, competitors are already producing at or near their capacity,
and expanding capacity is difficult. The newly formed firm may find it profitable to raise its
prices and reduce joint output unilaterally because the lost revenues on the foregone sales may
be outweighed bv the resulting price increase on the remaining sales (along with the cost reduc
tions associated w'ith decreased output). The Guidelines point out that this may be the case even
if the merged firms combined market share is lower than what might colloquially be thought o f
as a monopoly share.4
II. T h e R e a c h O f S e c t i o n 7 C l a y t o n A c t
Section 7 Clayton Act does not provide a definition o f the notion acquisition. Not until
the Celler-Kefauver-Amendment did the Act cover the acquisition o f a firm by an assets pur
chase. Nonetheless, since the closing o f the assets loophole in 1950 it is quite clear that the
43
44
45
46
4'
ibid. sec. 2 . 1 .
ibid sec. 2 . 1 2 .
ibid sec. 2 .2 .
ibid sec. 2221 .
ibid sec. 2 .2 2 .
rule reaches to the entire range o f corporation amalgamations, from pure stock acquisitions to
pure asset acquisitions including joint ventures, notwithstanding statutory exceptions.48 This
principle is also recognized by the U.S. authorities competent to conduct merger review.49 In
order to assess the anticompetitive effect o f a transaction within the reach o f the provision, the
Guidelines set forth a five-step process: (1) market definition, measurement and concentration50;
(2) the potential adverse competitive effects o f mergers51; (3) entry52; (4) efficiencies53; and (5)
failure.54 These steps with the exception o f the anticompetitive effects which just were de
scribed - are outlined below.
I II . M a r k et D e f in it io n
In order to be able to estimate any degree o f market power is it necessary7 to delineate the
relevant market because competition does not exist between all conceivable firms but only be
tween those offering similar products or services to customers in a certain area.55 Therefore in
evaluating a merger under the Guidelines, the initial task is to determine the relevant product
and geographic markets.
1.
T h e P roduct Market
A product market is defined as one incorporating all products that, from a consumer-demand perspective, are reasonable substitutes for each other.56 According to the Guide
lines, such a determination is made by including all products to which consumers would switch
in the face o f a small but significant nontransitory price increase (SSNIP) set by a hypothetical
monopolist5 In general, such a price increase is assumed to be five percent.58 The Guidelines
48
49
50
51
553
54
55
56
5"
see e. g. United States v. Philadelphia Xat'L Bank, 374 U.S. 321 (1963).
For a detailed overview over the transactions covered seegenerally Barbara A. Reeves, Acquisitions And Merg
ers (1999) PLI/Corp 683 at 693 ff.

1992 Merger Guidelines, supra note 10 sec. 1.
ibid. sec. 2. This is the overall purpose o f merger review rather than a mere step in the course o f the analysis.
ibid sec. 3.
Gregory J. Werden, Market Delineation And The Justice Departments Merger Guidelines [1983] Duke L. J.
514 at 515.
In this respect the 1992 Merger Guidelines entirely rely on demand-side substitutability and disregard any
supply-side substitutability which centers on the question o f whether a supplier offering not the same but a
similar product can switch its production with reasonable effort in order to undercut die market price, and
which is to a great extent taken into account by U.S. jurisprudence, see e. g. Blue Cross er Blue Shield United of
Wisconsin v. Marshfield Clinic, 65 F.3d 1046, 1410-11 (7th Cir. 1995): Even if two products are completely dif
ferent from the consumers standpoint, if they are made by the same producers an increase in the price o f one
that is not cost-justified will induce producers to shift production from the other product to this one in order
to increase their profits by selling at a supracompetitive price.
9
also preserve the Agencies flexibility to consider hypothetical price increases o f larger or smaller
than five percent, where appropriate, given the nature o f the industry.9
Moreover, the Guidelines now directly confront the Cellophane Trap, which refers to a
particular error widely believed to have been committed by the Supreme C ourt60 The Court
held that E. I. DuPont de Nemours & Co. (DuPont) did not have market power because there
were good substitutes for its product, cellophane, at prevailing market prices.61 But it did not
consider the apparent fact that DuPont was already exercising market power, raising cellophane
prices above competitive levels and bringing it into competition with higher-priced substitutes.6'
The Guidelines also include as part of the relevant market those firms that - to a certain
degree o f probability - enter the relevant market within one year and without incurring signifi
cant sunk cost63 o f entry and exit in response to a SSNIP.64 These firms are termed uncom
mitted entrants because they can quickly cease production without significant loss. Their pres
ence influences the market both before and after the merger.
2.
T h e G e o g r a p h ic M a r k e t
For the delineation of the geographic market, the 1992 Merger Guidelines employ the same
hypothetical price increase test65 The only deviation is that the geographic market has to be
defined for each of the parties separately.66 Special criteria which the 1984 Merger Guidelines
contained regarding the geographic market have been abandoned.
The degree o f migration as a reaction to a price increase is usually termed price elasticity. A high elasticity
indicates a high switching rate. Is pnee elasticity expressed with reference to the relation between the relevant
product and another, specified, product, the notion cross-price elasticity is employed. The cross-price elas
ticity between two products x andj can be expressed as follows:
= 5Q ,/6P r
0xv is the cross-price elasticity, 5Q* is the quantity o f product x demanded, 5P, is the increase o f price o f
product j . see e. g. Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, 469 (1992); Herbert Hovenkamp, Federal Antitrust Policy - The Law O f Competition A n d Its Practise, 2nd ed. (St. Paul: West, 1994) at 98 [herein
after Federal Antitrust Policy],
60
61
62
63
ibid.
United States v. E . I. DuPont de Nemours e~ Co., 351 L .S. 377 (1956).
ibidatdW .
Federal Antitrust Policy, supra note 58 at 99.
1992 Merger Guidelines, supra note 10 sec. 1.32: Sunk costs are market-specific investments in assets that
cannot be recovered through re-deployment outside the relevant market A significant sunk cost is defined
as one that would not be recouped within one vear.
M
65
ibid
ibid sec. 1 .2 1 .
10
The overall approach to market definition is consistent with the underlying premise o f the
Guidelines in that it focuses on the ability of sellers to raise prices profitably after the merger. If
there are alternatives to which consumers can turn in the face of a price increase, either in terms
o f products or suppliers, if and those products o r suppliers constrain the ability o f the merged
firms and its competitors to raise prices, then those alternatives must be included in the relevant
markets in which the competitive effects o f the merger are being evaluated.
IV. A s s e s s in g T h e C o m p e t i t i v e E f f e c t s O f M e r g e r s
After defining o f the relevant markets, the Agencies assess the mergers impact on compe
tition.
1.
M a r k e t Sh a r e A n d C o n c e n t r a t io n
In 1982, the old four-firm concentration ratio gave way to the Herfindahl-Hirschman In
dex, or HHI, which is generally considered to be a more accurate measure of competitive con
ditions in a m arket6 The HHI of a market is the Siam o f the squared market shares o f all market
participants, and it captures both the number o f firms in an industry and their relative sizes.68
The 1992 Merger Guidelines count concentration as the most important indicator o f a mergers
potential competitive impact because as markets become significandy more concentrated the
risk o f the exercise o f market power increases.69
Under the Guidelines, when a transaction creates a post-merger HHI o f less than 1000 the
market is presumed to be unconcentrated and the transaction probably does not have anticom
petitive effects.0 In a moderately concentrated market, L e. a post-merger HHI o f between 1000
and 1800, any increase o f more than 100 raises competitive concerns and prompts the Agencies
to conduct a more thorough analysis using a broader range of factors. 1 When a merger would
ibid.
This method was developed by Albert Hirschmann and Orrin Herfindahl in the late 1940s. Hirschmann
wanted to analyze the concentration o f the steel industry in Nazi-Germany and Herfindahl had in mind to
prove that the concentration o f the U.S. steel industry had decreased since the foundation o f the United States
Steel Corporation in 1901. Thus, the HHI was initially meant to be an instrument o f concentration analysis
from an ex-post perspective.
The single market shares are assessed either by reference to dollar or shipment sales if the products are differ
entiated or to units if the product is homogeneous, 1992 Merger Guidelines, supra note 10 sec. 1.41. The range
o f possible HHIs reaches from almost zero (extremely divided market) to 10000 (monopoly).
ibid. sec. 1.51a.
ibid sec. 1.51b.
11
increase the HHI by more than 100 points to a post-merger HHI exceeding 1800, it will be
presumed th a t... [such merger is] likely to create or enhance market power or facilitate its exer
cise. 2 This presumption o f illegality may be overcome by showing that other factors in the
Guidelines analysis make anticompetitive effects unlikely.3
Both coordinated interaction and the unilateral exercise of market power tend to become
more likely as concentration levels increase and the number of firms in the market decreases. *
The higher the post-merger concentration, the more important it is for the rebuttal case to be
water-tight. Even a merger to monopoly may be allowed to proceed, for example, if entry will
be timely, likely and sufficient to deter or counteract any anticompetitive effects.5 When a
merger leads to market concentration above 1800, the requirement to show that other factors
make the presumed anticompetitive effects unlikely is not evaluated in a vacuum, but in light
o f market concentration and market shares.'6 As market concentration increases significantly
above 1800, the demonstration must be better supported by the evidence. One caveat is cer
tainly in order. To acknowledge the existence of a relationship between concentration and likely
competitive effect is not to assume that there is a precise mathematical relationship between the
two. Extended focus on relatively minor differences in concentration statistics suggests that the
numbers have a scientific predictive value that does not exist. However, the approach set forth
in the 1992 Merger Guidelines shows that the Agencies have not managed yet to entirely re
nounce o f the overwhelming significance o f structural analysis; the strong presumption o f the
HHI thresholds appear like holdovers o f the structure-conduct-performance paradigm o f the
Pre-Chicago era of economics.8
2.
E n t r y An d Po t e n t ia l C o m p e t it io n
The analysis of entry plays an important role in U.S. merger review. The underlying idea is
that the threat o f new competitors entering the market erodes market power.79 The parties can
not raise prices or reduce output if other firms are ready to enter the market and undercut the
ibid. sec. 1.51c.

ibtd
ibtd sec. 1.51.
Paul A. Samuelson & William D. Nordhaus, Economics, 13th ed. (New York: McGraw, 1989) at 167 ff.
1992 Merger Guidelines, supra note 10 sec. 1.51c.
In the matter o f B.F. Goodrich Co., FTC Docket No. C-9159, Final Order o f March 15th, 1988, 53 F.R. 12379.
The Harvard Law Review Association, Analyzing Differendated-Product Mergers: 1716 Relevance O f Struc
tural Analysis (1998) 111 Harv. L. Rev. 2420 at 2424, 2437.
12
prices demanded by the incumbents.'0 According to the 1992 Merger Guidelines, the decisive
factor o f entry analysis is whether entry would deter or counteract the mergers anticompeti
tive effects.81 If such an effect o f entry into the relevant market can be perceived, the merger in
question is deemed not to create anticompetitive consequences.82
The Guidelines set forth a three pronged approach as to whether market entry occurs or is
likely to occur. The first question concerns timeliness.*3 The notion o f timeliness refers gener
ally to a period of two years from initial planning to significant market impacts.*4 The com
mitment o f the Agencies to take into account all phases o f entry85 requires a thorough investiga
tion o f all steps needed to successfully enter into the particular m arket Next, the likeliness of
entry is considered. Any market entry must promise sufficient recoupment for the entrant.
Thus, any entry can only be taken into account if it can profitably occur at pre-merger prices
and if such prices can be secured by the entrant86 The third step encompasses an inquiry as to
whether there would be sufficient entry to compensate the mergers anticompetitive impact.8 If
entry o f a certain number o f firms is possible and if there is adequate potential for them indi
vidually to choose the scale then entry is deemed to be sufficient88 Once it has been determined
that entry would be timely and likely, it will ordinarily found to be sufficient as well.
3.
INNOVATION ISSUES
In recent years, innovation issues have played an increasingly important role in U.S. anti
trust enforcement89, not only with regard to mergers, but also with regard to anticompetitive
'9
80
81
883
84
85
see e.g. United States v. Baker Hughes, Inc., 731 F. Supp. 3 (D. D. C- 1990), affd., 908 F.2d 981, 987 (D. C. Cir.
1990).
Janusz A. Ordover & Jonathan B. Baker, Entry Analysis Under The 1992 Horizontal Merger Guidelines"
(1993) 61 Antitrust L. J. 139 at 142
ibtd.
ibid. sec. 3.2
ibid.
ibid. sec. 3.1. This may include planning, design, management, permitting, licensing and other approvals, con
struction, debugging, promotion, marketing, distribution and satisfaction o f customer testing and qualification
requirements.
86 ibid sec. 3.3.
8" ibid sec. 3.4.
88
89
ibid
Benjamin Gasman & Matthew S. Barnett,Mergers &Acquisitions: RecentTrends In AntitrustEnforce

ment (1998) 1049 PLI/Corp 379 at393. This isconsistent withthe attitude takenby the courts which
also
display a growing reluctance to unnecessarily discourage activities that minimize production, distribution, and
other operational cost, or that otherwise promise die development and use o f better and more efficient tech
niques and practices, see e. g. Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1 (1979); Continen
ta l T .l '., Inc. v. G TE Sylvania, Inc., 433 U.S. 36 (1977).
13
behaviour and its consequences, such as innovation markets90, standard setting91, network ef
fects92 and market access93.
The basis o f the FTCs and DOJs intervention is furnished by the theory o f innovation
markets and the special characteristics o f high-tech business. High-technology markets often
show winner takes all characteristics. A firm that is able to take the lead in the decisive stage
(product development and the innovation stage) can easily obtain a d o m i n a n t position that en
ables it to foreclose competition by imposing its standards on the entire market and creating
non-accessible networks.94 The theory o f innovation furthermore assumes the existence o f a
separate market for research and development (R&D) which is distinct from any relevant mar
ket for existing products.95 The theory o f competitive harm articulated by the Agencies holds
that a merger o f two innovating corporations can, under certain circumstances, suppress or slow
down innovation.96 The Agencies are concerned that a reduction o f innovation might delay the
introduction o f new products or new and improved production processes. Thus, FTC and DOJ
are concerned that the combination o f two firms engaged in separate, but similar, R&D tracks
might result in fewer varieties o f products ultimately being made available to consumers.9 It has
also been suggested that a reduction in current innovation efforts could reduce future innova
tion itself, denying consumers not only the next, but also successive generations o f output.98
Albeit not being regarded without criticism99, this approach o f the FTC and DOJ clearly has
affected the Agencies merger enforcement practice.
95
96
In the matter o f American Home Products Corp., FTC File N o. 941 -0116, Decision And Order o f April 14th, 1995
[hereinafter in the matter o f American Home Products Corp., Decision And Order].
In the matter o f D ell Computer Co., FTC File No. 931-0097, Consent Agreement and Analysis To Aid Public
Comment o f Nov. 22nd, 1995, 60 F.R. 57870.
Untied States v. Microsoft Corp. and Intuit, Inc., No. 95CV-1393WRO, Complaint o f April 27th, 1995 [hereinafter
United States v. Microsoft Corp. and Intuit, Inc., Complaint].
ibid.; William H. Page, Microsoft And The Public Choice Critique O f Antitrust (1999) 44 Antitrust Bull. 5 at
8.
An older example o f this development is the market for video cassettes in which the VHS standard has been
adopted by almost all VCR manufacturers.
B. Crisman & M. S. Barnett, supra note 89 at 393.
see in the matter o f Wright Medical Technology; FTC File No. 951-0015, Proposed Consent Agreement And
Analysts To A d Public Comment o f Jan. 4", 1995, 60 F.R. 46001, where the FTC expected a decrease in the
incentive to develop the next generation o f finger implants.
In the matter o f American Home Product Corp., Decision And Order, supra note 90.
In the matter o f CibaGetgy Ltd., CibaGeigy Corp., Chiron Corp., Sandoz Ltd., Sandoz Corp., and Novartis A G , FTC
File No. 961-055, Complaint o f March 24th, 1997 [hereinafter in die matter o f Ciba-Gcigy L td et aL, Com
plaint].
B. Crisman & M. S. Barnett, supra note 89 at 392-93.
14
V. D e f e n d i n g A n t i c o m p e t it iv e M e r g e r s
Whereas the steps o f merger review outlined above are always carried out by the FTC and
DOJ, the following points - though not being defenses in a technical sense are most often
invoked by the parties to the merger in order to indicate its procompetitive effect.
1.
E f f ic ie n c i e s A n d Sy n e r g ie s
U.S. antitrust law recognizes that mergers generally have the potential to engender synergies
that can lower the costs o f the parties and benefit consumers.100 For that reason the FTC and
DOJ take efficiency enhancing effects o f M & As into account when assessing their competitive
impact.101 Even when a merger otherwise appears to threaten competition by further concen
trating an already concentrated market, and even if those concerns are not eliminated by ease o f
entry or other market conditions, the merger may result in such substantial efficiency savings
which could not be captured in any other way - that, on balance, the transaction is procompeti
tive.
Sec. 4 o f the 1992 Merger Guidelines was overhauled in April 1997 for the purposes o f
rendering the attitude o f the Agencies toward the recognition o f efficiencies more transparent
and thereby facilitating the increased reference to efficiencies by the parties to a transaction.102
As a result of the 1995-96 FTCs hearings on global competition and its respective staff re
port103, the Agencies apparendv felt that, due to the increasing pressure o f international compe
tition, the functioning o f the efficiency claim had to be clarified.
Sec. 4 expressly recognizes that mergers can generate offsetting beneficial efficiencies.
However, it still maintains that the decisive aspect in merger review remains the substantial less
ening o f competition. A transaction that, after an overall assessment o f its pros and cons, is one
M. Dreher, supra note 25 at 381.

The courts found it difficult to fully recognize an efficiency defense over a long period. However, they
referred increasingly to the procompetitive effects of efficiencies in recent years, see e. g. RSR Corp. v. FTC, 602
F.2d 1317, 1325 (9th Cir. 1979); FTC v. Aidant Techsysterns, Inc., 808 F. Supp. 9, 21 (D. D. C. 1992); United States
v. Rockford Memorial Corp., 717 F. Supp. 1251 (N. D. 111. 1989), aff d., 898 F.2d 1278 (7th Cir. 1990); but see FTC
v. Staples, Inc. and Office Depot, Inc., 970 F. Supp. 1066,1089, 1090 (D. D. C. 1997).
i: J9 9 2 Merger Guidelines, supra note 11; Robert Pitofsky, Efficiencies In Defense O f Mergers: Two Years
After (1999) 7 George Mason L. Rev. 485 at 486 [hereinafter Efficiencies].
103 Federal Trade Commission, Anticipating the 21st Century: Competition Policy in the Nem High-Tech Global Marketplace,
Report o f June 3rd, 1996, online: <http://www.ftc.gov/opp/global.htm> (date accessed: Aug. 20th, 2000)
[hereinafter FTC Competition Policy Report 1996].
100
101
15
that substantially lessens competition, must be enjoined.10* For efficiencies that can be taken
into account as procompetitive factors, the new sec. 4 introduced the notion o f cognizable
efficiencies, i. e. those that are merger-specific, have been verified by the reviewing agency, and
do not arise from anticompetitive behaviour.105 Efficiencies are considered to be merger-specific
if they are likely to be accomplished with the proposed merger and unlikely to be accomplished
in its absence, for example by divestiture or licensing.106 The Agencies assure that they will not
insist on alternatives that are merely theoretical.10 In accordance with the perspective o f Section
7 Clayton Act that focuses on any line o f commerce, FTC and DOJ point to the fact that
cognizable efficiencies have to occur in the relevant market, or have at least to be inextricably
linked to it.108
In contrast to the general rule, the Guidelines impose on the parties the onus o f proof that
the proposed transaction will create sufficient efficiencies.109 The information relevant for a re
alistic assessment of efficiencies is solely at the parties disposition, and they therefore have to
convince the Agencies o f the likelihood and magnitude o f each asserted efficiency, how and
when each would be achieved (and any cost o f doing so), how each would enhance the merged
firms ability and incentive to compete, and why each would be merger-specific.110 The Agen
cies have committed themselves to a sliding-scale-approach, stating that the more concerns that
are raised by a proposed merger, the greater the generated efficiencies have to be.111 In this re
spect a greater weight is given to short-term efficiencies as they are less speculative than long
term synergies. Sec. 4 o f the 1992 Merger Guidelines also states that efficiencies related to
shifting production among facilities that were formerly owned separately, which thereby reduces
the marginal cost of production, are more likely to result in consumer benefits and therefore
more likely to be recognized than efficiencies relating to procurement, management, or capital
cost.11' Nonetheless, efficiencies are at least theoretically able to rebut any presumption o f anti
1CU see Efficiencies, supra note 102 at 486-87.

105 1992 Merger Guidelines, supra note 1 1 sec. 4.
106
ibid.
icr ibid
ibid
ibid\ 1992 Merger Guidelines, supra note 10 sec. 1; this is consistent with recent judicial decisions, see also FTC
v. Umvmity Health, Inc., 938 F.2d 1206 (11 * Cir. 1991).
no 1 9 9 2 Merger Guidelines, supra note 11 sec. 4.
111 Efficiencies, supra note 102 at 486.
n: 1 9 9 2 Merger Guidelines, supra note 11 sec. 4. This, again,has roots in the L\S. Americanmodelo f competi
108
109
tion that enhances consumer welfare. Only thosesynergiesresulting in real cost reductions canbe passed on
to consumers in the form o f price decreases.
16
competitive effects of a merger triggered by increased market concentration and the absence o f
2.
F a il in g F ir m , F a il in g D iv is io n , A n d E x it in g A s s e t s
A successful failing-firm defense allows an otherwise objectionable transaction to be cleared

that is, regardless o f its effects on competition.111 Because it is the only absolute defense al
lowed in U.S. merger law, the criteria to satisfy the defense are stringent. As a result, and despite
the fact that it contains a highly discretionary element, it is rarely upheld.114
The Guidelines contain a list o f four prerequisites to be met for an invocation o f the failing
firm defense that closely follow the criteria developed by U.S. courts. (1) The allegedly failing
firm must be in economic jeopardy in the near future.115 Usually, this requires a comprehensive
analysis of the acquired firms financial status, including present liquidity, the orders situation,
and the existence o f business relations to possible financial backers.116 (2) The firm must not be
able to financially reorganize as specified under Chapter 11 o f the Bancruptcy A c t11 The back
drop of this requirement is that the approval o f the transaction shall only be considered as the
lesser of two evils if the acquired firm otherwise has to leave the market. (3) The part)' relying
on the failing firm defense has to substantiate the alleged absence o f alternative purchasers.11*
Those reasonable alternatives must at least encompass an offer to purchase the failing firm at
a price exceeding the liquidation value of its assets.119 The Guidelines suggest no standard with
regard to the reliability of the financing o f the alternative offer. Apparently weak offers, how
ever, will not be taken into account (4) The proponents o f this defense must demonstrate that
absent the acquisition, the assets o f the failing firm would exit the relevant markets.120 This
last condition is comprehensive, being a general explanation o f the entire failing firm defense,
rather than an additional requirement
113
114
115
116
119
120
The failing firm defense was firstly referred to in a decision o f the U.S. Supreme Court; United States v. General
Dynamics Corp., supra note 19 at 507; see also the famous Sigma-Omega-Phi-example in Phillip Areeda & Louis
Kaplow, Antitrust Analysis, 4th ed. (St. Paul; West 1988) ^ 322.
Spencer Weber Waller, A Comparative Look At Failing Firms And Failing Industries (1996) Antitrust L J.
703 at 705 [hereinafter Failing Firms].
seefor thejurisprudential approach e. g. Olin Corp. v. FTC, 986 F.2d 1295, 1306-07 (9th Cir. 1993); United States v.
Black c~ Decker Manufacturing Co., 430 F. Supp. 729, 778-81 (D. Md. 1976); FTC v. Great Lakes Chem. Corp., 528
F. Supp. 84, 96-97 (N. D. 111. 1981); see also ETC Compeotion Policy Report 1996, supra note 103 at 11, 18.
11 U.S.C.S. 1101-1174 (1988); 1992 Merger Guidelines, supra note 10 sec. 5.1.
ibid fn. 39.
ibid
17
In sec. 5.2 the Guidelines also recognize the defense o f failure with regard to an endangered
division of a firm otherwise capable o f surviving. The requirements to be met for successful
resort to this defense are generally congruent with those that apply with regard to the entire
firm. Nonetheless, the Guidelines state that there are high standards for the establishment o f the
threat o f failure.121 In order to avoid any approval on the base of a faked financial condition
o f the division in question an obvious possibility given the potential o f distributing losses
within one firm a considerable onus o f proof is placed on the parties.122
V I. VERTICAL INTEGRATION
Since the Celler-Kefauver-Amendment to the Clayton Act was enacted in 1950, Section 7
Clayton Act also extends to vertical mergers. Vertical mergers happen between firms doing
business on distinct markets, those markets being, however, different stages of the same prod
ucts manufacturing or distribution process. Vertical mergers create vertical integration, which
involves the self-fulfillment o f functions by a firm, those functions being also available on a
market in exchange to payment.123 With regard to vertical mergers, the conclusion that a trans
action results in increased market concentration that facilitates uni- or collateral anticompetitive
behaviour cannot be drawn in the same way as it is with regard to horizontal ones.124 However
vertical mergers can produce anticompetitive consequences.
The 1992 Merger Guidelines only contain criteria for the competitive assessment o f hori
zontal transactions to the effect that in cases of vertical mergers the preceding 1984 Merger
Guidelines have to be referred to.125 According to them the potential o f vertical integration to
harm competition is threefold: (1) vertical mergers can raise barriers to entry' as new entrants
might face the need to enter into both markets instead o f one126, (2) vertical integration may
ibid. sec. 5.2.

fV lU .
123
124
125
126
It is not entirely clear whether the perspective o f the Agencies differs from the one o f the courts. The decision
o f United States v. General Dynamics Corp., supra note 19, seemed to suggest that the acquisition o f a failing firm
was a means to preserve at least the remaining competition, whereas sec. 5.1 apparently roots in the concep
tion that competition is not affected at all if such a firm merges, [a] merger is not likely to create or enhance
market power or facilitate its exercise." Still, the Guidelines do require stricter conditions for the failing firm
defense than die case law does, Failing Firms, supra note 114 at 705.
Herbert Hovenkamp, Antitrust, 2nd ed. (St. Paul: West, 1993) at 133.
Phillip Areeda & Donald Turner, Antitrust, vol. 4 (Boston: Little, Brown, 1980) 1000a at 207.
1984 Merger Guidelines supra note 13. In 1985 the DOJ issued Vertical Restraints Guidelines, 4 Trade Reg. Rep.
(CCH) 13105 (1985) that were rescinded by the Clinton Administration in 1993.
18
facilitate coordination especially on the upstream market12, and (3) vertically integrated firms
may try to evade rate regulations.128
The 1984 Merger Guidelines list three conditions for an anticompetitive effect o f vertical
mergers with regard to raising barriers to entry. First, the degree reached by vertical integration
must render the simultaneous entry into both markets necessary in order to obtain either the
required input from the upstream market or sufficient sales channels on the downstream mar
ket.129 This need does, for instance, not subsist if the post-merger environment includes enough
unintegrated capacity'.130 Second, the need for simultaneous entry' must generate a sufficiently
deterring effect on potential entrants.131 The Guidelines do not define the notion of sufficiency'
but they clarify that mere increased costs are not sufficiendy deterring in that respect.132 Fi
nally, the Guidelines assume that any barriers to entry' do not affect the performance on the
post-merger market unless the HHI exceeds 1800. Therefore challenges o f mergers on markets
below that concentration level are un likely .133
The second dimension subject to a higher degree o f scrutiny is the facilitation of coordi
nated behaviour by vertical integration.134 The Guidelines mention the case o f a highly concen
trated upstream market with participants vertically integrated into the retail market. The possible
lenient monitoring o f retail prices is from the Agencies perspective - conducive to anticom
petitive behaviour on the supplier level.135 Again, the FTC and DOJ confine the assumption o f
an anticompetitive potential in that respect to markets showing an HHI over 1800.136
Finally, vertical integration is seen as a means to circumvent rate regulations that are im
posed on certain industries, for instance public utilities.13 Vertically integrated, regulated firms
can artificially swell the cost o f internal transactions in order to expand profits by passing on the
ir
is
129
130
ibid. sec. 4.22.

ibid sec. 4.23.
ibid sec. 4.21.
ibid. the Agencies assume that it is sufficient to have a free capacity that allows single-market entry to two
more firms.
131
132
133
134
136
13*
ibid sec. 4.212.

ibtd
ibid sec. 4.213.
ibid sec. 4.22.
ibid' James T. Halverson, .An Overview O f Legal And Economic Issues And The Relevance O f The Vertical
Merger Guidelines (1983) 52 .Antitrust L. J. 49 at 78.

ibid sec. 4.23.
19
increased cost to consumers.138 The Guidelines, however, expressly recognize the extreme
difficulties in spotting such a tactic.139
VII. R e m e d ie s
It must be borne in mind that the remedies for unlawful mergers are not punitive but, given
that merger review is to prevent future damage to competition, are more equitable in character.
Generally, the Agencies can seek three different types o f remedies: (1) structural remedies like
divestiture and licensing, (2) conduct related remedies like cease and desist orders, and (3)
monetary remedies like civil penalties, disgorgement, and restitution. As the later analysis o f
merger review practice will show, the FTC and DOJ most likely resort to structural remedies as
these promise the highest degree o f efficiency, and they use the other possibilities only in ex
ceptional cases. Recently the FTC performed a study o f the past effect o f structural remedies.140
Based on its results, particular refinements were made to the process o f such remedies by
adopting, for instance, the identification o f buyers before the deal is cleared (up-front buyers),
interim supply agreements, the divestiture o f crown jewels141, provision o f technical assis
tance, and the use of trustees to monitor the divestiture process.
138 ibid. sec. 4.23.

>3" ibid
140 Federal Trade Commission, Staff 'Report A Stud)- O f The Commissions Divestiture Process (1999), online:
<http://www.ftc.gOv/os/1999/9908/index.htm#6> (date accessed: Aug. 20th, 2000).
141 see also below Chapter 3, B. I. 4 a) at 45.
20
Ch a p t e r 2
T h e N o t io n O f T r a n s n a t io n a u z a t io n
M yth s An d
The phenomenon o f an increasing number of M & As is embedded in a market-structural

development that is commonly called ^obalization.14'
A. T h e D e v e l o p m e n t O f T h e M a r k e t St r u c t u r e s
The growth of wodd-wide direct investments exceeds that of international trade by two to
three times.143 In 1996 the increase in imports in the OECD countries was 80O/o greater than the
increase in G N P.144 This expansion of economic structures is, however, not a phenomenon pe
culiar to the late 20th century. At the end o f the 19th century, at the time o f the first merger
waves in the U.S., similar world-wide market structures existed.145 The fact that the former de
velopment did not reach the dimensions o f the present market expansion is mainly based on
three conditions: (1) the late 19th century lacked the information technology that now allows for
a wodd-wide exchange o f data within negligible time, (2) the mobility o f the workforce then was
in effect a one-way street, i. e. the streams o f migration were primarily oriented from Europe
to North-America, and (3) European nationalism and the outbreak o f W odd War I abrupdy
ended further integration.146
In principle, the notion of globalization is used to describe the spatial expansion o f prod
uct markets and the emergence of an increasingly tight network between them on an interna
tional level.14 During the first phase of the current progress in the eady 1980s, this expansion
14
146
see e. g. European Commission, X X I Uth "Report on competition policy 1997 (Brussels-Luxemburg: 1998) at 72 at
para. 167. Some o f the most famous examples o f the recent M & A wave are the combinations o f DaimlerBenz AG and Chrysler as well as of Deutsche Bank and Bankers Trust which merged in 1999 to form the
worlds largest private bank with assets worth 825 billion U.S. S- Ciba-Geigy and Sandoz now form Novartis,
and Hoechst together with Rhone-Poulenc Rorer merged to Aventis, both now ranking among the biggest
pharmaceutical manufacturers. In the U.S. in 1998 the 44 billion U.S. S merger o f MCI and WorldCom took
place as well as the 48 billion acquisition o f Telecommunications, Inc. by AT & T and the Exxon (the former
Standard Oil o f New Jersey) and Mobil (the former Standard Oil o f New York) announced their merger, val
ued at some 80 billion U.S. S.
Henning Klodt, Internationale Regeln fur den Wettbewerb [1995] Wirtschaftsdienst 556 at 556.
FTC Competition Policy Report 1996, supra note 103 at 11: This reflects the fact that an increasing part o f
domestic demand is met by imports. Front-runner in 1996 was Canada with an import quota o f 60% with re
gard to high-value consumer goods. In 1996 the value of the direct investments o f U.S. firms abroad and for
eign firms in the U.S. summed up to 1.7 trillion U.S. S (1,700,000,000,000 U.S. S).
Dani Rodrik, Has Globalization Gone Too Far? (1996/97) 39 Cal. Management Rev. 29 at 34.
ibid. at 35; Alberto Tita, Globalization: A New Political And Economic Space Requiring Supranational Gov
ernance [1998] 32:3 J. World Trade 47 at 47; Roman Terrill, What Does Globalization Mean? [1999]
Transnatl. L. & Contemp. Probs. 217 at 218.
Gebhard Kirchgassner, Globalisierung: Herausforderung fur das 21. Jahrhundert" (1998) 53 Aussenwirtschaft 29 at 33.
21
presented itself chiefly in the form of growing distances between production sites and marketing
areas. The following stage, which is currently in process, saw and still sees the rise o f world-wide
networks o f production processes. The characteristic feature of these networks is the tendency
to move single stages o f the manufacturing process to those places where the conditions for the
particular step are most favorable.14* In parallel to this development, firms often vertically inte
grate in order to produce an efficient distribution system.149
Globalization has become the subject of public discussion mainly because one o f its con
comitants is the growing influence o f multinationally operating firms, which are accumulating
considerable masses o f capital. There are concerns that globalization has already led to a dispar
ity between these global players and the single nations.150 Furthermore, an unhalted globaliza
tion could lead to a splitting between the internationalized/successful and the declining eco
nomic segments. As a consequence it is feared that there will be massive unemployment, the
reduction o f social security7 systems, and an economic fragmentation within the population af
fecting the stability7o f the current democratic systems.151
B. T h e N a t u r e O f T r a n s n a t io n a l iz a t io n
I.
T r a n s n a t io n a l iz a t io n I n L ie u O f G l o b a l iz a t io n
Multinationally operating firms were in former times characterized by a centralized struc

ture,132 whereas the global players o f the latest generation show a more dislocalized structure.
Theoretically, the single steps o f the production chain within one firm can all be dispersed into
different regions o f the world.153 However, virtually multinational firms are still an exception.
The vast majority7o f international operators consists o f a core firm located in one country7which
controls more or less independently performing subsidiaries scattered in other economic sys
148
''9
150
151
152
R. Terrill, supra note 146 at 218; Lester C. Thurow, Globalization: The Product O f A Knowledge-Based
Economy (2000) 570 Annals Am. Acad. Pol. & Soc. So. 19 at 20 [hereinafter Globalization].
Klodt, supra note 143 at 557.
Linda A. Marbry, Multinational Corporations And U.S. Technolog} Policy: Rethinking The Concept O f
Corporate Nationality (1999) 87 Geo. L. J. 563 at 565; in fact, the declining significance o f nations is often
seen as die central feature o f globalization, see R. Terrill, supra note 146 at 218.
sec generally Hans P. Martin & Harald Schumann, Die Globalisierungsfalle - D er Angriff auf Demokratie und Wohlstand, english ed. (London: Zed Books, 1998); see also R. TerrilL, supra note 146 at 219 critizing that the media
often focus on the negative consequences o f globalization.
Gilbert Marchlewitz, Globalisierung, Standortkonkurrenz und die Notwendigkeit intemationaler Zusammenarbeit [1997] WSI Mitteilungen 771 at 772.
152 ibid.
22
tems and jurisdictions.154 This fact becomes particularly lucid if one scrutinizes the average
structure o f economic commitment.153 An analysis o f this commitment generally divulges that
the lions share o f the profits does not remain in the countries where they were made, but are
unless reinvested transferred into the country o f the parent entity.136
An important factor impeding the creation o f truly global firms is the fact that the advan
tages a firm hopes to obtain when it spreads out geographically15 are most realizable in regions
with sufficiently developed infrastructural features.154 The process of globalization therefore
only justifies a characterization as being o f new quality* in the triad of the economically most
developed regions: North-America, Europe, and South-East Asia.159 Before a firm can expand
its activities internationally it has to cope with considerable internal challenges: specialization,
establishing a more effective structure of personnel, or technological upgrading. In general, a
firms efforts to become competitive on an international level result in a leaner structure. For
this reason the geographic diversification o f its activities depends on the existence o f sites pro
viding an efficient infrastructure, e. g. ancillary* industries, transport facilities, and sp ecialize d
service firms.160 These requirements are, so far, met only in the regions mentioned above. Thus,
for the following analysis o f U.S. American merger control, the current phenomenon of market
expansion shall be referred to as transnationalization.161
154 Graham Wilson, Business A n d Politics: A Comparative Introduction, 2nd ed. (Chatham: Chatham House Publishers,
1990) at 164: Louis Vi. Pauly & Simon Reich, National structures and multinational corporate behavior en
during differences m the age o f globalization (1997) 51 Intl. Org. 1 at 4-6.
155 L. A. Marbry, supra note 150 at 594.
156 G. Wilson, supra note 154 at 164; R. Terrill, supra note 146 at 224: The financial sector is excepnonal in terms
of volatility-, with billions o f U.S. S moved within seconds it is itself one o f the major dnving forces o f transnanonalization: Richard G. Parker, Prepared Remarks O f Richard G. Parker, FTC, Before The International
Bar Association, Barcelona, Spain, Sep. 28th, 1998, online: <http://www.ffc.gov.speeches/
other/barcelona.htm> (date accessed: Aug. 20th, 2000).
15~ see bclou Chapter 2, B. II. 1. at 24
158 Globalization, supra note 148 at 20.
159 Wolfgang Streeck, Industnelle Beziehungen in einer intemationalen Wirtschaft in Ulrich Beck, ed., Politik
der Globalisicrung (Frankfurt am Main: Suhrkamp, 1998) 169 at 176; Neil Campbell & Michael J. Trebilcock,
International Merger Review*: Problems O f Multi-Jurisdictional Conflict in Erhard Kantzenbach/HansEckart Scharrer/Leonard Waverman, eds., Competition Polity In A n Interdependent World Economy (Baden-Baden:
Nomos, 1993) 129 at 132; Hartmut Hirsch-Kreinsen, Grenzen der Globalisicrung [1997] WSI Mitteilungen
487 at 489: To the abovementioned triad o f industrial centers some transient economies that possess special
advantages like an oversupply o f cheap but sufficiently qualified manpower and at least an infant infrastruc
tural pattern must be added. India may serve as an example with regard to the research and development o f
software. Special in this respect, as well, are China and the nations o f Eastern Central and Eastern Europe
whose attractiveness for investment roots either in the availability o f a potent market or the supply o f cheap
labor in the vicinity Western European markets.
160 Jorg Meyer-Stamer, Globalisierung, Standortkonkurrenz und Entwicklungspolitik [1997] Intl. Pol. & Ges. 1
at 1.
161 G. Wilson, supra note 154 at 164; the competent divisions o f the United Nations Organization also use the
term transnationalization to describe the development in question.
23
Transnationalization is complex. Therefore it is subjugated under the general rule o f poly

causality. One of its causes was that, under the General Agreement On Tariffs And Trade
(GATT) and its subsequent transformation to the World Trade Organization (WTO), the re
duction o f trade impediments was intentionally brought about by governmental action. Fur
thermore, the collapse o f the Eastern Bloc lead to an opening o f markets in the former com
munist states and concurrendv o f markets in the Southern hemisphere.162 These changes have
occurred alongside the recent development o f information technolog}' and a reduction o f trans
portation costs.163 The combination o f all these occurences formed the breeding ground for
transnationalized market structures.
II. T h e E f f e c t s O f T r a n s n a t i o n a l i z a t i o n
The diversification of production processes and markets continues to have an effect on

enterprises and economic systems.
1.
E f f e c t s O n F ir m s A n d M a r k e t s
Transnadonalizing firms primarily aim to avoid transaction costs which, under normal cir
cumstances, are an inevitable part o f cross-border economic activity. The notion o f transaction
costs refers to a broad spectrum o f expenses that range from transportation and c o m m u n ication
costs to customs, requirements o f special insurances, and the risk o f shifts in currency exchange
rates.164 Transaction costs do not only comprise quantifiable expenses, but also immeasurable
expenditures like intangible costs.165 A firms presence on several international markets therefore
triggers a discernible cost reduction. A second important effect o f transnationalized activity lies
in an increased proximity7 to foreign markets. Separated geographical markets in todays world
economy are less the result of expensive transportation than rooted in distinct consumer prefer
ences generated by different cultural and social backgrounds.166 Market proximity enables any
I6163
164
G. Kirchgassner, supra note 147 at 35.

R. Terrill, supra note 146 at 218.
Alfred SchiUler, Ordnungspolinsche Dtmensionen der Globalisierung, in Reinhold Bislcup, ed., Globaiisicntng
und Wcttbewcrb (Bern: Hans Huber, 1996) 85 at 85.
165 An example for the production o f intangible cost is a situation that requires an interpreter. In this situation the
intangible costs are made up by the loss o f efficiency caused by the fact that the business partners cannot ne
gotiate directly with one another.
166 J. Meyer-Stamer, supra note 160 at 3.
24
producer to discern these preferences, to predict them, or even to manipulate them, and is
therefore a tool o f immense importance for businesses.16
The incentives for a firm to transnationalize hence sum up to a whole bundle o f motives
that cannot all be designated with utmost precision. Notwithstanding this fact, external growth
in the course o f transnationalization is based on the following main objectives:
1.
With regard to marketing, international M & As provide the parties to the transaction with
improved access to supply and sales markets. The increased combined market share and the
market proximity serve as instruments to achieve this improvement164 Within the scope o f
transnationalization, competition shifts from an inter-industrial level to an intra-industrial
level, i. e. the importance of traditional criteria as opposed to subjective competition, for
instance brand recognition, is declining.169 To successfully compete in an intra-industrial
market, proximity is crucial.1'0
2.
Combining the capital resources o f the merging parties generates an increased financial
strength as well as facilitating access to borrowed capital. This results in improved possibili
ties to cushion the impact of expenditures, for instance for research and development
(R&D) projects.1 1
3.
Concerning the production stage, transnational M & As generally also pursue goals that are
congruent with the objectives of traditional transactions. Coordination and the sharing of
production facilities can both reduce costs and increase the amount o f units at the same
time (economies of scale). The production o f two different products within one firm can
also generate cost savings (economies o f scope). Economies o f scale and scope are fur
thermore well suited to create positive effects beyond the production stage, i. e. when pur
chasing supplies on the upstream market, as well as with regard to financing, and the possi
,6
Hartmut Berg & Armin U. Rott, Daimler-Chrysler: Ein ZusammenschluB neuer Qualitat? [1999] WuVC' 140
at 143.
168 Rolf Jungnickel & Georg Koopmann, Globalization O f Business: Implications For International Competi
tion And Related Policies" in Erhard Rantzenbach/Hans-Eckart Scharrer/Leonard Waverman, eds., Competi
tion In A n Interdependent World Economy (Baden-Baden: Nomos, 1993) 33 at 40.
169 A. Schuller, supra note 164 at 94.
170
Globalization, supra note 148 at 26: Firms are confronted with the choice between becoming (part of) a
global player or a nimble niche enterprise.
Milton Handler et al., Cases A n d Materials On Trade Regulation, 3rd ed. (Mineola: Foundation Press, 1993) at 447.
25
bility to offer a whole range o f products can lead to significant advantages on the distribu
tion markets.12
Transnationalization by means o f external growth is seen with some scepticism. According

to economists it is driven by the intention to eliminate troublesome competitors or simply to
strengthen the own market position.1"3 Moreover, external growth solely for purpose o f gaining
market power often does not create the efficiencies that provide for a potential justification in
many merger cases.1 4 Yet M & As o f this character have a disproportionate share o f the expan
sion o f transnational market structures.15 This diagnosis should lead to a thorough analysis o f
transnational M & As with regard to their possible anticompetitive effects. However, the re
quirement of a strict investigation clashes with a second consequence of transnational M & As.
2.
E f f e c t s O n E c o n o m ic Sy s t e m s A n d N a t io n s
Transnationalization does not only alter the general economic set-up for firms but also af
fects entire economic systems. According to a simplifying scheme, cross-border M & As ef
fecting a reduction o f transaction costs lead to a more optimized allocation o f resources and to
augmented wealth for everyone.16 The notion of wealth, however, proves problematic as it is
not clear whether an improvement in this respect requires an overall net increase or whether any
simple transfer of resources to the already wealth}' elements o f an economy suffices.1
I "5
see general/} Fredenc M. Scherer & David Ross, Industrial Market Structure A n d Economic Performance, 3d ed. (Bos
ton: Houghton Mifflin, 1990) at 162 ff.
Robert Pitofsky, Proposals for a Revised United States Merger Enforcement in a Global Economy (1992)
81 Geo. L. J. 195 at 222 [hereinafter Proposals]; William J. Baer & David A Balto, New Myths .Mid Old
Realities: Recent Developments In Antitrust Enforcement [1999] Colum. Bus. L. Rev. 207 at 210, both
stressing that todays M & As are almost exclusively strategically motivated; Richard G. Parker & David A.
Balto, The Merger Wave: Trends In Merger Enforcement And Litigation (1999) 55 Bus. Law. 351 at 356.
The then CEO o f the Daimler-Benz AG, Jurgen Schrempp, said in an interview that the gain o f market power
was one o f the most important incentives for the merger with the Chrysler Corp., H. Berg & A. Rott, supra
note 167 at 147 in. 22.
E. Kantzenbach & K. Kinne, supra note 34 at 73, pointing to the fact that all M & As are implemented for
selfish reasons and not for the purpose o f a macroeconomically optimized allocation o f resources.
According to Enrico Adriano Raffaelli, Oligopolies And Antitrust Law (1996) 19 Fordham Inf 1. L. J. 915 at
925, transnational mergers are preferably accomplished by big firms on oligopolistic markets; see also Global
ization, supra note 148 at 26: The only method for big enterprises to survive is to dice and slice, i. e. to
merge and get larger, and to sell the divisions that fail to globalize.
R. Terrill, supra note 146 at 217.
Joseph F. Brodley, The Economic Goals O f Antitrust Efficiency, Consumer Welfare, And Technological
Progress (1987) 62 N. Y. U. L. Rev. 1020 at 1025.
26
Any increase in wealth requires the presence o f both immobile18 and mobile1"9 production
factors in appropriate proportions. One result o f transnationalization is an increased volatility o f
capital and know-how that consequendy accumulate at places where they find the most con
venient conditions (arbitrage).180 Despite the evolution o f cross-border markets these conditions
are still determined by, and therefore confined to, economic systems, which often converge with
single nations and their jurisdictions.181 The outcome o f arbitrage is that those economic sys
tems (nations) that are able to provide for a capital-enticing set-up, profit from transnationaliza
tion at the expenses of others.182 This has led to a disparity between the incentive to lure capital
and the necessity- to efficienriy control economic activity for the purpose of maintaining compe
tition.183 Economic systems find themselves competing for capital on three different levels:
1.
competing in erecting an infrastructure that is as efficient as possible,
2.
competing in raising funds for this infrastructure by avoiding placing financial burdens on
capital,
3.
competing in streamlining regulations and their application, such as competition-related

regulations, regulations of the job-market, regulations regarding environmental protection
and other fields o f relevance for the economy.184
An analysis o f capital fluctuation during the recent past reveals that this competition chiefly
takes place between the nations o f the abovementioned economic triad, due to the existence o f
infrastructure and the proximity to potential markets.183 Furthermore, many transient economies
deter any investments by their political instability.186 Nonetheless, they have started participating
r8 Ground, infrastructure, and to a lesser degree low-qualified workers.

|T9 Capital, know-how, and high-qualified workers.
180 G. Wilson, supra note 154 at 170, taking advantage o f interlocative differences in the cost structure is generally
called arbitrage, but see ibid. at 173: One should not overestimate the speed at which capital transfers occur
even in transnauonalized structures. Capital alone does not suffice for setting up production facilities and the
suppty o f less mobile production factors does not happen from one day to another.
181 see A. Tita, supra note 146 at 48. An exception might be seen in die Common Market o f the European Union
(EU), but even there many o f the conditions which determine the attractiveness to capital such as taxation
differ in the various Member States.
18;: G. Marchlewitz, supra note 153 at 772.
183 Israel paid Intel L.S. S 600 million for the construction o f a plant, Brazil recently promised Ford U.S. S 700
million.
184 Werner Mussler, Die Wirtschaftsverfassung der Europeaschen Gemeinschafi im W andet I 'on Rom nach Maastricht (Ba
den-Baden: Nomos, 1998) at 68; Globalization, supra
note 148 at 22: Countries need corporations more
than corporations need countries.
185 H. Hirsch-Kreinsen, supra note 159 at 488-89.
186 G. Wilson, supra note 154 at 167.
27
in competition for capital a development that is believed to intensify at the expense o f the
industrial nations.18
According to U.S. economists Paul Krugman and Anthony J. Venables, this development
can be traced back to a regularity' named core-periphery-pattem.188This pattern is based on an
ongoing decrease in transaction costs. If these fall short o f a certain threshold, the first conse
quence is an accumulation o f capital in highly industrialized regions. As the exigency' of produc
tion on the spot diminishes with falling transportation costs, firms choose the infrastructurallv
most efficient locations.189 The maelstrom o f the industrialized centers results in a further in
crease in the already high cost of production factors.190 With continuing falls in transaction
costs, the investment pattern is eventually reversed, leading to a shift o f investments to the for
merly neglected non-industrialized regions in order to profit from lower factor expenditures.191
Albeit somewhat oversimplifying the complex system o f capital streams, this model is well
suited to serve as an instrument to forecast future development concerning the competition
between economic systems. It is evident that this process is far from being homogeneous with
regard to some countries the shift to transient economies has already started,192- while others193
still rarely attract major investments. The consequence is that the rivalry for capital between the
economic systems o f the world will increase.
The situation o f competition between economic systems described above creates trends
that are particularly perceptible in the two major economic blocks - the U.S. and the EU. The
decision o f transnationally operating firms to inject financial means into a system is the result o f
a rational cost-benefit-analysis. To be able to make an attractive offer, economic systems prefer
to use the instruments of tax and competition policy'.194 The efforts made, however, impose
costs on any national economy. Those costs can, in a situation o f currying favor with capital,
188
189
190
G. Kirchgassner, supra note 147 at 36; contra Globalization, supra note 148 at 24 where Thurow predicts a
nstng inequality instead.
Paul Krugman & Anthony J. Venables, Globalization And The Inequality O f Mahons (1995) CX Quart. J.
Econ. 857.
Michael E. Porter, The Competitive Advantage O f Nations (New York: Free Press, 1990) at 622. This is current
phase o f transnationalization.
P. Krugman St A Venables, supra note 188 at 861.
191
ibid.
192
for example India, supra fti. 159.

such as many South-American countries or Russia.
.Alfred C. Aman, The Globalizing State: A Future Oriented Perspective On The Public/Private Distinction,
Federalism, And Democracy (1998) 31 Vand. J. Transnatl. L. 769 at 777; Michael Maibach, The Industrial
Policy Cycle (1993) 5 Stan. L. St Poly Rev. 23 at 25. Cost savings on the first o f the abovementioned compe
tition levels infrastructural measures - are rarely possible or feasible.
193
28
not be amortized by taxing capital. The only escape lies in taxing immobile production factors
such as labor. As the high costs o f labor make up the main disadvantage of industrialized re
gions, economies can try to decrease the level o f real wages. The result o f this proceeding is a
relative impoverishment of the workforce (working poor). The U.S., for instance, took this
route.193 The countries o f Western Europe, on the other hand, show a different political climate
in which such a wage decrease is met with stiff political opposition. Those countries therefore
have to cope with high globalization unemployment.196
3.
E f f e c t s O n M e r g e r Co n t r o l
Bv the increased complexity o f market structures and international competition, U.S.

merger review faces a series of major uncertainties. For many decades foreign competition in
the U.S. was practically nonexistent In this solely domestic oriented scenery, the pattern o f as
sessing market power by reference to supply potential was perfectly adequate. However, trans
nationalization has altered how markets function in a way that renders the general scheme o f
U.S. antitrust law and merger review questionable.19
The initial goals o f U.S. antitrust law o f promoting competitive conduct and consumer wel
fare by means of efficient resource allocation, acceleration o f product improvement, and ame
lioration of productional and organizational techniques19are as explained above grounded
on the assumption that monopolistic market structures are prone to anticompetitive behaviour
and therefore their existence should be prevented.199 This theoretical base, however, only deals
with the two extremes structures of perfect competition and monopoly that in real-life markets
rarely exist.200 On the other hand, no economic theory', let alone the antitrust authorities and
courts, has so far furnished a satisfactory' explanation o f the oligopoly, one of the most common
market structures.201 Given that transnationalization increases rather than decreases the variety
of interaction between firms and the forms of existing market structures, there is mounting
195
G- Marchlewitz, supra note 152 at 777; G. Kirchgassner, supra note 147 at 37.
170 ibid.-. Globalization, supra note 148 at 25.
I9 David J. Gerber, Symposium on Antitrust Law and the Internationalization o f Markets: Forward: Antitrust
and the Challenge o f Internationalization (1988) 64 Chi.-Kent L. Rev. 689 at 689.
198 Burton D. Garland & Reuven R. Levarv, The Role o f American Antitrust Laws in Todays Competitive
Global Marketplace (1997) 6 U. Miami Bus. L. J. 43 at 43.
199 ibid at 45.
200 S. D. Johnson & A M. Ferrill, supra note 9 at 596.
201 Lester C. Thurow, Dangerous Currents: The State ofEconomics (New York: Random House, 1983) at 98 ff.
29
support for a fundamental change in U.S. antitrust law.202 It is argued that under the influence o f
globalized competition the threat of monopolization does not exist for the vast majority o f the
markets203, and that international competition serves as a substitute for rigorous enforcement
and vigilant antitrust authorities.204 Worse still, U.S. antitrust provisions entirely disregard the
need for U.S. firms to constandy realize economies o f scale in order to be able to meet the
challenges o f globalized competition.205
Even stopping far short o f abolishing antitrust law, the Agencies find themselves con
fronted with the characteristic feature o f antitrust law that decisionmaking in that area is a highly
factual affair requiring comprehensive analysis and containing more than just one prognostic
element.206 Business actors themselves often face the dilemma that even given a minimum o f
certainty and dependability of available data, and an acceptable level of proficiency in evaluating
that information, the choice between two alternate courses o f action is indeterminate.20 Espe
cially large firms rarely show a homogeneous structure and pursue a multitude o f goals which
renders decision making extremely difficult.20Given this situation, how can antitrust authorities
be expected to determine an accurate solution? The static market model U.S. competition law is
obsessed with by becomes particularly visible when it comes to assessing market power in inno
vation markets. The concept of firms operating in discrete markets is completely inapt for these
situations as products whose interchangeability determine the market boundaries do not even
exist yet In an environment o f global competition where innovation becomes an ever more
important factor, it might be appropriate to discard the traditional abstraction o f firms as mere
profit-maximizing entities and substitute the idea o f a firm as a nucleus o f change. This, how
ever, would really entail the elimination o f a major portion o f the established antitrust tools, as
well as a redefinition o f the objectives o f antitrust law.
202 see the former Secretary o f Commerce Malcolm Baldridge, Proposes Repeal on Antitrust Language, Olmer
Japan Trip is Canceled (1985) 2 Intl. Trade Rep. (BNA) 284 at 284; D. J. Gerber, supra note 197 at 693.
203 B. D. Garland & R. R Levalry, supra note 198 at 49.
204 VCilliam F. Shughart et al., Antitrust Enforcement and Foreign Competition, in Fred S. McChesney & Wil
liam F. Shughart II, eds., The Causes A n d Consequences ofAntitrust (Chicago: University o f Chicago Press, 1994)
179 at 179.
205 B. D. Garland & R. R. Levalry, supra note 198 at 52-53; D. J. Gerber,supra note 197 at 692, argues that firms
must be able to adapt to changing demand patterns by shifting theflowo f productionwithoutbeing faced
with the need to set up new production facilities or retooling old ones. But see also Federal Antitrust Policy, supra
note 58 at 37 where Hovenkamp claims that all antitrust provisions, namely Section 1 Sherman Act have
proved ineffective against the evolution o f oligopolies, so that the attention must shift on merger review.
206 see Chicago Board o f Trade v. United States, 246 U.S. 231, 238 (1918).
20' S. D. Johnson & M. A. Ferrill, supra note 9 at 599.
206 P. A. Samuelson & W. D. Nordhaus, supra note 75 at 481-82.
30
These effects o f transnationalization elucidate the quandary into which competition policy,
and as a result merger control, is brought: there exists a conflict o f objectives between the
maintenance of competition and the achievement o f international competitiveness o f the system
and its firms.209 Given that external growth is one o f the most important components o f trans
nationalization, the latter factor is decisively influenced by the rigor o f the merger control sys
tem.210 The temptation to instrumentalize merger control for the purpose o f competitiveness
and to neglect its function as a means o f protecting competition, is considerable: If the realiza
tion o f economies and the accumulation o f market power is permitted unchecked to domestic
firms, it is possible to increase their international competitiveness and to be attractive for an
influx o f capital.211 To this dilemma rooting in rather external factors another layer is added by
the consistent attempts o f business actors to invoke antitrust action in their behalf, trying to
push antitrust enforcement toward their favor.212
209
210
211
212
E. Kantzenbach & K. Kinne, supra note 34 at 67; D. J. Gerber, supra note 197 at 693.
E. Kantzenbach & K. Kinne, supra note 34 at 68.
ibid.-, W. Streeck, supra note 159 at 232; M. E. Porter, supra note 189 at 625.
VC. H. Page, supra note 93 at 39; to the public choice critique o f antitrust see below Chapter 4, B. I. 2. at 84
31
Ch a p t e r
J -
C o m p e t it io n V. C o m p e t it iv e n e s s ? U.S. M e r g e r R e v ie w I n
P r a c t ic e
In order to determine whether U.S. merger review shows features o f instrumentalizadon,
the analysis will be conducted from a changing perspective varying from mainly domestic cases
to cases involving international markets and Non-U.S. firms. The objective o f this proceeding is
to detect whether the Agencies apply the standards of market power assessment in a different
manner depending on the degree o f competition by foreign enterprises U.S. firms have to cope
with. Under the condition o f the initial hypothesis accuracy, the rigour o f enforcement would
most likely be consistent with the standards set out in the Merger Guidelines in purely Ameri
can constellations, i. e. U.S. firms that do business in the U.S. only and do not face significant
competition from abroad. M & As between U.S. enterprises that fiercely compete with NonU.S. firms should reveal a considerable degree o f leniency, whereas transactions involving NonU.S. businesses should encounter a variable degree o f strictness according to whether interna
tional competition is to be prevented or the it is aimed to lure investments o f foreign capital.
A.
D o m e s t ic M e r g e r s
I.
C o n s u m e r G o o d s A n d R e t a il
1.
C a r d in a l
H ealth,
In c ./ B
ergen
B r u n s w ic k
Co r p .
An d
M c Ke s s o n
C o r p ./ A m e r i S o u r c e H e a l t h C o r p .
In 1998 the McKesson Corp. (McKesson) and AmeriSource Health Corp. (AmeriSource),
the first- and fourth-largest drug wholesaling chains in the U.S., and Cardinal Health, Inc. (Car
dinal) and Bergen Brunswick Corp. (Bergen), the second- and third-largest drug wholesalers in
the U.S., proposed to merge. The transactions, valued at U.S. $ 2.25 billion and 2.50 respectively
were enjoined by a district court after the FTC had filed a complaint.213 The court, following the
FTCs contentions, stated that the two merged entities would have controlled 80% o f the
wholesale pharmaceutical distribution business.214 The FTC had alleged that, on the basis o f a
pre-merger HHI o f 1648, the Cardinal/Bergen merger alone would generate a dramatic increase
o f 802 points to 2450 thereby creating a market o f high concentration.215 Likewise the McKes
son/AmeriSource merger would have led to an increase of 629 points resulting in a concentra-
:u
F TC v. Cardinal Health. Inc., Bergen Brunswick, Corp. v. McKesson Corp., AmeriSource Health Corp., 12 F. Supp. 2d 34
(D. D. C. 1998).
-1J ibid. at 40.
215 ibid. at 53.
32
don level o f 2211.216 The consummation o f both mergers would almost have doubled the HHI
from 1648 to 3079.
Crucial to the enjoinment was the fact that Sporkin J. followed the narrow market definition
as advanced bv the FTC which confined the relevant product market to the wholesale distribu
tion o f prescription drugs and excluded direct purchase from manufacturers and selfwarehousing.21 Even though the court did not rely on the market defining method set forth in
the 1992 Merger Guidelines, instead preferring the fashion o f market delineation developed by
the U.S. Supreme Court in Brown Shoe Co. v. United States which refers to reasonable interchangeabilitv from a customers perspective218, it held that the defendants offered a sophisti
cated conglomerate of services in the wholesale sector for which no reasonable alternatives ex
isted.219 It recognized that the transaction would engender substantial efficiencies through the
closing o f overlapping distribution centers, superior purchasing practices, enhanced buying
power, and a reduction in overhead and inventory cost But it adopted the approach o f the
Agencies, arguing that these efficiencies were not merger-specific and therefore not cogniza
ble.220 The only issue where the courts and the FTCs opinion deviated was the ease o f entry.
Unlike the Commission the court held that the existing barriers to entry' (a fair amount o f capital
and know-how, a positive reputation, and, most importandy, a considerable customer base)
could each be overcome in response to serious enough anticompetitive practices.221
2.
St a p l e s , I n c . A n d O f f ic e D e p o t , I n c .
In 1997 Staples, Inc. (Staples ) announced its intention to merge with Office Depot, Inc.
(Office Depot) a U.S. S 4 billion transaction that would have taken place between two com
panies that sell office supplies through super stores. Upon a motion filed by the FTC, the
merger was enjoined by the District Court o f the District o f Columbia and abandoned by the
parties.222
Again, the court adopted the FTCs definition of the relevant product market referring to
216 ibid.
2r ibid at 45-46.
218 370 L'.S. 294 (1962).
219 FTC v. Cardinal Health, Inc., Bergen Brunswick, Corp. v. McKesson Corp., AmeriSource Health Corp., supra note 213 at
47-48.
220 ibid at 63.
221 ibid at 58.
222 FTC v. Staples, Inc. and Office Depot, Inc., supra note 101.
33
prior case-law223, and concluded that the relevant market was the selling o f consumable office
supplies through superstores as a submarket of the whole office supply retail market.224 Both
FTC and the court applied a series o f practical indicia in delineating the relevant market and
discarded the intuitive logic o f a broader market225 A decisive factor was the pricing practice
o f Staples which revealed that in areas where the superstores o f the acquirer had to compete
with those o f its rivals, market prices were up to 13% lower than in areas where Staples ran the
sole superstore.226 According to the court and the FTC, these stores formed a group o f shops
distinct from all others, particularly from the perspective o f office supply superstores main
customers, i. e. small businesses with less than 20 employees.22
On the grounds that the court also adopted the FTCs definition o f the geographic market
as a conglomerate o f 42 metropolitan areas, it inferred that the post-merger concentration in all
o f these markets would be intolerably high.228 Moreover, the court took into account the parties
practices which had already played a role in determining the relevant product market and held
that they would most likely engage in monopoly-like price raising.229
The parties allegation o f strong potential competition due to low barriers to entry was re
jected by the FTC and the court, both pointing to the fact that the recent trend on the relevant
market had been exiting rather than entering, and that this market had seen a significant raise in
concentration level due to a series of M & As.230 Likewise the parties efficiency analysis was
discarded by arguing that even though the court admitted that the burden of pro o f on the
parties must not be excessively high the evidence produced by Staples and Office D epot was
unrealistic and achieved cost-savings would most probably not be passed on to the consum
ers.231
223
Brown Shoe Co. v. United States, supra note 218 at 325: Rothery Stonge c~ I'an Co. v. A tlas I 'an Lines, Inc., 792 F.2d
210. 218 (D. C. Cir. 1986).
FTC v. Staples, Inc. and Office Depot, Inc., supra note 101 at 1075-78.
ibid at 1075.
224
225
226 ibid
228
ibid at 1076-79.
ibid at 1081: [TJhe least concentrated area would be Kalamazoo-Battle Creek Michigan, with an HHI of
229
230
231
ibid at 1082
ibid at 1087.
ibid at 1089.
5,003, and many areas would have HHIs o f 10,000.
34
II. T h e E n t e r t a i n m e n t I n d u s t r y : S o n y C o r p . O f A m e r i c a A n d L T M H o l d i n g s ,
In c.
In April 1998 the merger between Loews Theatres, a subsidiary o f the Sony Corp. of
America (Sony), and Cineplex Odeon Corp. (Cineplex), was conditionally approved by the
D O J.232 Both parties to the merger operate chains o f movie theatres in many metropolitan areas
o f the U.S.; in Manhattan and the City o f Chicago they were the two largest exhibitors o f firstrun films where they competed against each other with regard both to getting movies from film
distributors and to attracting movie-goers.233 The DOJ contended that the proposed merger
would generate a movie exhibition chain whose market share o f 67% in the relevant metropoli
tan areas would exceed the combined market shares o f all its competitors.234 The authority'
feared an elimination of the competition between the parties for the first-run movie market, and
a subsequent ability' to raise the prices for movie tickets to a supracompedtive level.23
According to the findings o f the DOJ, the merger would yield in the most critical areas
post-merger HHIs of 4815 (Manhattan) and 6438 (Chicago), resulting from increases o f 1911
and 2874 respectively.234 Interestingly, the DOJ also analyzed the anticompetitive effects o f the
proposed transaction on the upstream market, viz., the movie distributors. The Agency claimed
that the combined market power o f the parties would result in their ability' to dictate prices and
terms and would rob the distributors of their capacity' to play off the competing exhibition
chains against each other, thereby d im in ish in g the distributors revenue.23
The likelihood o f new' market entry' was denied by the Agency' who pointed to the fact that
it is extremely difficult to set up attractive movie exhibition places in metropolitan areas. Ac
cording to its findings, available theater sites are scarce, real estate and construction costs are
233
an
236
United States, State o f New York, State of Illinois v. Sony Corp. ofAmerica, L T M Holdings, Inc., Cineplex Odern Corp.
and J. E. Seagram Corp., Case N o. 98-CIY-2716, Proposed Final Judgement o f April 16th, 1998 [hereinafter
United States, State ofNcn York, State of Illinois v. Sony Corp. ofAmerica et a t, Proposed Final Judgement).
United States, State o f New York, State of Illinois v. Sony Corp. ofAmerica, L T M Holdings, Inc., Cineplex Odeon Corp.
and J. E. Seagram Corp., Case No. 98-CIY-2716, Complaint o f April 16th, 1998 at 2-3 [hereinafter United States,
State ofNew York, State ofIllinois v. Sorry Corp. ofAmerica et aL, Complaint].
ibid. at 2, 10: The delineation o f the geographic market by the DOJ relied on the assumption o f a deep reluc
tance o f movie-goers to leave their vicinity which would, from the DOJs perspective hinder, any migration to
more remote theatrical exhibition places as a reaction to a SSNIP. Therefore die relevant geographic markets
were seen as being predominantly local.
ib id at 3.
ib id at 13.
ibid at 16-17.
35
among the highest in the nation, and acquiring the necessary permits and approvals can be diffi
cult and time-consuming. Identifying a site, planning the development and constructing a thea
ter in either city takes several years.238
Eventually, the DOJ and the parties agreed upon a divestiture o f 14 movie theaters in Man
hattan and 11 in Chicago.239 The effect o f the divestiture is such that, neither in Manhattan nor
in Chicago, does the size of the merged entity7 exceed the dimension o f the biggest movie thea
ter chain prior to the transaction. The parties have not yet complied with the period for the di
vestiture set out in section IV (A). Consequendy the assets to be divested are currendy held by a
trustee appointed by the court Surprisingly (or not), the combined endty named Loews Cine
plex Entertainment Corp. has raised the prices for movie dckets in Manhattan as o f Feb. 26th,
1999 from U.S. S 8.75 to U.S. S 9.50 and in Chicago from U.S. S 8.00 to U.S. S 8.50 asserting
that the reason for the increase were its augmented operating costs.240
III. T h e
Ai r l i n e
Indu stry :
N o rth w est
A ir l in e s
C o r p . An d
C o n t in e n t a l
A i r l in e s , I n c .
In late 1998 the DOJ sought a permanent injunction to block the proposed acquisition o f
the stock o f Continental A irline s, Inc. (Continental) by Northwest Airlines Corp. (Northwest),
the fifth- and the fourth-largest airlines in the U.S.241 The DOJ contended that Northwest and
Continental were one anothers most important competitors on seven relevant markets identi
fied as routes between the areas o f Minneapolis, Memphis, Detroit, Cleveland, Houston, and
Newark as well as on a number o f smaller markets.242 The DOJ spotted at least five routes
236
239
240
241
242
United States. State of Sen York. State o f Illinois v. Sony Corp. of America, L-Tht Holdings, Inc., Cineplex Odeon Corp.
andJ. E. Seagram Corp., Case No. 98-CIY-2716, Competitive Impact Statement o f April 16th, 1998 at 10.
United States, State of New York, State o f Illinois v. Sony Corp. of America et. aL, Proposed Final Judgement, supra
note 232 at 10.

The ticket pnce o f U.S. S 9.50 is the highest all throughout the U.S., Barbara Stewart, S9.50 for the Movies?
Vallone Urges a Boycott The New York Times (March 2nd, 1999) Sea. B at 7.
United States v. Northwest Airlines Corp. and Continental Airlines, Inc., Civil Action No. 98-74611, Complaint o f
O a . 23rd, 1998 [hereinafter United States v. Northwest Airlines Corp. and Continental Airlines, Inc, Complaint];
United States v. Northwest Airlines Corp. and Continental Airlines, Inc, Civil Action No. 98-74611, Amended Com
plaint o f Dec. 18th, 1998 [hereinafter United States v. Northwest Airlines Corp. and Continental Airlines, Inc.,
Amended Complaint]. Northwest intended to purchase the stock shares held by .Air Partners L. P. which rep
resented 14% o f the outstanding equity but 51% o f the voting rights. This was the first time the DOJ tried to
enjoin an airline merger by lawsuit since the enactment o f the Airline Deregulation A c t of 1978, Pub. L No. 95504, 92 Stat. 1705.
United States v. Northwest Airlines Corp. and ContinentalAirlines, Inc, Complaint, supra note 241 at 2.
36
where the combined market share o f the parties would have accounted to 100 o after the
merger. 243
According to the DOJ, the incentive to compete against each other would be significandy
reduced if Northwest was allowed to acquire the desired share. Fares for airline tickets would
most likely increase on the markets d o m in a te d by the parties.244 The possibility o f new entry was
denied by the DOJ which claimed that the parties, being hub-to-hub carriers, had significant
cost advantages, and that access to gate facilities was difficult to obtain by new entrants.245 The
Governance Agreement between the parties that obliged Northwest to put the acquired shares
into a Voting trust for a six-year period and set forth the way in which Northwest would have
to restrict the exercise o f its controlling power was characterized by the DOJ as being fictitious
as it did not affect the virtual ownership o f Northwest; nor would it form any obstacle for
Northwest to control the strategic decisions of Continental, and it was to expire after six
years.246 In response to the complaint, the airlines modified the terms of their final agreements,
purportedly in an effort to remedy the alleged anticompetitive effects. However, the DOJ indi
cated that the modifications were not satisfactory, and in January 1999 it filed an amended com
plaint asking the court to order Northwest to divest its interest in Continental and to declare the
agreements illegal under federal antitrust law.24
IV . T e l e c o m m u n i c a t i o n s : A T & T C o r p . A n d T e l e - C o m m u n i c a t i o n s , I n c .
On August 23rd, 1999 an acquisition o f Tele-Communications, Inc. (TCI) by AT & T Corp.

(AT & T) valued at some U.S. S 48 billion was approved by the DOJ.248 The Agencies treated
the transaction as to be entirely domestic, scrutinizing only the possible distortions o f competi
tion on U.S. markets even though the developments in the telecommunications industry" radiate
far beyond U.S. borders. The main competitive factor at issue was the high concentration on the
market o f mobile wireless telephone services in certain metropolitan areas that was provoked by
ibid. at 8: Detroit-Houston, Cleveland-Minneapolis, Minneapolis-New York, Houston-Minneapolis, Houston-
Memphis.
ibid at 10.
ibid at 9.
ibid at 10.
United States v. Northwest Airlines Corp. and ContinentalAirlines, Inc., Amended Complaint, supra note 241.
United States v. A T c~ T Corp. and Tele-Communications, Inc., No. 98-CV03170, Final Judgement (D. D. C. Aug.
23rd, 1999) [hereinafter United States v. A T e~ T Carp, and Tele-Communications, Inc., Final Judgement].
37
the transaction, because of AT & T s existing interest in Sprint PCS Corp. (Sprint PCS).*49 Mo
bile wireless telephone services generally consist o f two components: cellular and personal
communication services (PCS). After the Federal Communications Commission (FCQ had
assigned extra spectrum for PCS providers in 1995 the average number o f mobile telephony
carriers increased from two to between four and six. Nonetheless, the DOJ alleged that the cel
lular carriers which prior to 1995 offered wireless services in a duopoly one of whose partici
pants was AT & T, still held a market share o f 800/o in a number o f markets. Moreover, subse
quent to the transaction AT & T would have held a 23.5 o share o f Sprint PCS which is one of
its main competitors.250 PCS and traditional cellular services are, from the DOJs perspective,
close substitutes, particularly those offered by Sprint PCS and AT & T, as these companies offer
their services not only confined to a local area but also nation-wide, being in possession o f the
requisite facilities in most metropolitan regions and even smaller towns.251
The DOJ contended that the transaction would lead to high concentrations in many speci
fied metropolitan markets, most o f them showing a pre-merger HHI o f more than 1800.252 In
general, the market for wireless services shows an extreme price-competition, the cost for the
services being the decisive factor for customers to switch to another supplier.253 However, as
AT & T held the abovementioned interest in Sprint PCS it could nevertheless raise prices and
reduce the quality of the services offered. If customers switched to Sprint PCS - which seemed
likely AT & T would recapture the losses incurred by the migration.254 New market entry to
offset these anticompetitive effects estimated unlikely.255
The DOJ and the parties eventually agreed upon the divestiture o f the 23.5o interest in
Sprint PCS by AT & T.256 The stock was to be transferred to an independent trustee who was
:'|Cy United States v. A T c~ T Corp. and Tele-Communications, Inc., No. 98-CV03170, Comments Relating To Proposed
Final Judgement And Response O f The United States To Comments (D. D. C. March 26*, 1998) at
2[hereinafter United States v. A T c~ T Corp. and Tele-Communications, Inc., Comments]; even though AT & T had
made it clear from the start that it was willing to divest its interest in Sprint PCS.
250 ibtd. at 2. In 1998 AT & T s revenues from wireless operations accrued to U.S. S 5 billion. Sprint PCSs to U.S.
S 975 million. The U.S. show a number o f approximately 60 million subscribers who bought wireless services
valued at L'.S. S 30 billion in 1998.
251 United States v. A T er T Corp. and Tele-Communications, Inc., No. 98-CV03170, Complaint of Oct. 12*, 1998 at 6
[hereinafter United States v. A T c ~ T Corp. and Tele-Communications, Inc., Complaint].
252 United States v. A T c~ T Corp. and Tele-Communications, Inc., No. 98-CV03170, Competitive Impact Statement o f
Oct. 12*, 1998 fn. 6 [hereinafter United States v. A T e~ T Corp. and Tele-Communications, Inc., Competitive Im
pact Statement].
253 ibid. at 8.
254 ibid. at 9.
255 ibid. at 9-10.
256 United States v. A T c~ T Corp. and Tele-Communications, Inc.. Final Judgement, supra note 248 at 5-6.
38
given the period of Eve years to sell the shares. This by far exceeds the periods normally granted
by the DOJ. The long duration is a result o f fears uttered by the DOJ that a faster divestiture
could impede the progress o f further setting up Sprint PCS high-potential wireless network,
which was deemed to be an excellent promoter o f further competition.
B. R e v ie w
Of
Mergers
In
I n d u s t r ie s
E n c o u n t e r in g
I n t e r n a t io n a l
C o m p e t it io n
I.
M e r g e r s O f D o m e s t ic F ir m s
1.
T h e O il I n d u s t r y : E x x o n C o r p . A n d M o b il C o r p .
On Dec. I s', 1998 the parties announced the merger between the Mobil Corp. (Mobil) and a
wholly owned subsidiary' o f the Exxon Corp. (Exxon) as well as the acquisition of all outstand
ing shares o f Mobil by Exxon in order to create a new entity under the name of Exxon Mobil
Corp. (Exxon Mobil).25 The Agency' discovered a whole catalogue of relevant product markets
in which the transaction touched off competitive concerns.25The delineation o f the identified
lines o f commerce relied first o f all on the highly precise specifications for the respective prod
ucts that make, from the FTCs perspective, the substitution by any other product impossible.259
Thus, the Agency' here focused more on functional factors than on the usual SSNIP test. Since
only some product markets mentioned in the Complaint260 possess the international dimension
relevant for this analysis, the portrait o f the case is limited to these markets. More specifically,
the international markets were (1) the territory o f Guam for the importation, terminaling261, and
marketing o f motor gasoline and other light petroleum products, (2) the U.S. and Canada for
-15"
258
259
260
261
In the matter o f ELxxon Corp. and Mobil Corp., FTC File No. 991-0077, Complaint o f Nov. 13th, 1999 at para. 7
[hereinafter in the matter o f Exxon Corp. and M obil Corp., Complaint]: The transactions value was U.S. S 80
billion.
ibid at para. 8:
a. the marketing o f motor gasoline;
b. the refining and marketing o f gasoline that meets the specifications o f the California Air Resources Board
(CARB gasoline);
c. the bidding for and refining o f jet fuel for the U.S. Navy,
d. the terminaling of gasoline and other light petroleum products;
e. the pipeline transportation o f light petroleum products;
f. the pipeline transportation o f crude oil;
g. the refining and marketing o f paraffinic base oil; and
h. the production and sale o f jet turbine oil.
ibid at paras. 9-16.
ibid at para. 8 (f), (g), (h).
Terminaling means to provide temporary storage o f gasoline and otherlightpetroleum products
received
from a pipeline or marine vessel, and the redelivery o f such products fromstorage tanksinto tanktrucks or
transport trailers for ultimate delivery to retail gasoline stations or other buyers.
39
the marketing, and refining o f paraffinic base oil products, and (3) the world for the manufac
ture and sale of jet turbine oil.262
The Agency complained that in the territory of Guam there existed a highly concentrated
market, and that the market concentration would increase significandy through the merger.263
The supply o f gasoline and diesel into Guam from Singapore was carried out solely by Mobil,
Exxon, and the Shell Oil Co., the merger would consequendy increase the existing HHI by
more than 2800 to 7400, measured by stadon counts; Exxon Mobil would own 34 o f Guams 43
stations which equals a 84% market share.264 The FTC alleged that, due to the high concentra
tion, the post-merger market was subject to coordination, most likely leading to higher prices.
New market entry to defeat such a price increase was considered improbable as the minimum
terminal capacity retail oudets were unavailable in Guam; the only attempt to enter the market
took place in 1988 and failed seven years later when the entrants four gas stations were sold to
Mobil.265
The market for paraffinic base oil products in the U.S. and Canada266 was deemed to cross
the threshold of moderate concentration as a consequence o f the merger.26 The pre-merger
market showed a production of 45.9 million barrels per day (MBD) by Exxon and 23.8 MBD by
Mobil in North-America accumulating to a 35% market share o f the combined entity7. Accord
ing to the FTCs findings Exxon was the price leader, and other base oil producers regularly
refrained from expanding production subsequent to a price increase in order to take advantage
o f it. The addition o f Mobils capacity7would increase the domination o f Exxon on the relevant
market to an intolerable degree.268
The wodd market for jet turbine oil was also known for its high concentration.269 The par
ties dominated the market, holding shares that, combined, accounted for 75% o f the world-wide
262
264
ibid. at para. 17 (i)-(g).

ibid. at para. 27.
In the matter of Exxon Corp. and M obil Corp., Analysis To Aid Public Comment And Commissioner State
ments o f January 18th, 2000, 65 F.R. 2618 at 2623 [hereinafter in the matter o f Exxon Corp. and Mobil Corp.,
265
ibid.
266
In the matter o f Exxon Corp. and Mobil Corp., Complaint, supra note 257 at para. 28: Paraffinic base oil is a
refined petroleum product that forms the foundation o f most o f the worlds finished lubricants.
263
.Analysis].
ibid.
268
269
In the matter of Exxon Corp. and M obil Corp., Analysis, supra note 264 at 2623.
ibid.: Jet turbine oil is used to lubricate the internal parts o f jet engines used to power aircraft.
40
market and 90 o of sales to commercial airlines. Weak competition in sales to commercial air
lines would be replaced by a monopoly, involving a significant increase of prices for jet turbine
oil.270 The FTC rejected the possibility o f any relevant market entry as the sale o f jet turbine oil
requires the approval of many military and civilian organizations.2 1
On November 30th, 1999 the FTC provisionally entered into an agreement containing con
sent orders in order to settle the complaint, and contemplating the issuance o f a proposed or
der. The agreement and the proposed order provided structural remedies to appease the con
cerns of the FTC. Exxon is required to divest its terminal and retail assets on Guam separately
from the right to use the brand Exxon.2 2 The divestiture has to include Exxons rights in
joint terminaling arrangements with the Shell Oil Co. as well as Exxons liquefied propane gas
storage facilities.2 3 With regard to the North-American paraffinic base oil market, the parties are
required to consent to a transfer o f control over a quantity of base oil production equivalent to
Mobils production in the U.S. to a third party.2 4 This includes the relinqu is h in g o f Mobils
control over the base oil production o f the Valero Corp. and the entering o f agreements with no
more than three firms to supply these firms with at least 12 MBD o f base oil produced by the
combined entitys refineries.2 3 Finally, Exxon must divest its entire jet turbine oil business. The
business includes exclusive, perpetual licenses to use specified Exxon patents, as well as other
intellectual property, research and testing equipment, and Exxons manufacturing facility' in
Bayway, New Jersey.26 The agreement provides that any failure o f the parties to comply with
their obligations authorizes the FTC to appoint a trustee to arrange the divestiture o f either the
assets provided for or of crown jewels, alternative assets that are broader than the assets
originally to be divested.2
The FTCs chairman Robert Pitofsky and the Commissioners Sheila F. Anthony and
Mozelle W. Thompson pronounced in a separate statement that the approval o f the merger
between the second- and fourth-largest vertically integrated oil companies o f the world should
not be misinterpreted as a sign o f the Agencys countenance o f the continuing trend toward
ro
ri
r273
r4
r5
276
^
In the matter of Exxon Corp. and Mobil Corp., Complaint, supra note 252 at paras. 53-34 (a), (b).
ibid. at para. 30.
In the matter o f Exocon Corp. and Mobil Corp., Analysts, supra note 264 at 2623.
ibid. at 2626.
ibid at 2623.
ibid at 2626.
ibid
ibid at 2323-24.
41
concentration in the oil industry.2' 8 As the most important reason for final approval, the Com
missioners stated that, as 60% o f the parties assets are located outside the U.S., the transaction
had been reviewed and approved by multiple competition authorities.279 The total market share
of the top four firms o f 42% o f the market o f the refining and sale o f gasoline in the territory o f
the U.S. was expressly described as not ordinarily a subject o f concern in antitrust enforce
ment.280
2.
The
M e t a l I n d u s t r y : P r e c is i o n
C a s t p a r t s C o r p . An d W y m a n -G o r d o n
C o m pan y
On May 17th, 1999 Oregon-based Precision Castparts Corp. (PCQ and the Wyman-Gordon
Company in Massachusetts (Wyman-Gordon) agreed upon the acquisition o f 100% o f WymanGordons outstanding securities through a cash tender offer281 valued at approximately U.S. $
721 million.282 Both parties are engaged in the development, manufacture, and sale o f titanium
aerospace investment cast components, as well as large stainless steel and large nickel-based
superalloy aerospace investment cast components.283 The FTC identified these commercial ac
tivities as the relevant product market and alleged that the relevant geographic market was
world-wide.284 All markets are highly concentrated and except for the development, manufac
ture, and sale of large stainless steel aerospace investment cast components, for which there are
a total o f six suppliers wodd-wide, they reveal only four market participants.285
According to the FTC the consummation o f the transaction would lead to several anticom
petitive effects such as the elimination o f competition between the parties, the significantly
rB
279
280
281
ibid. at 2626.
ibid
ibid at 2627.
Chesterfield S. Oppenheim, Glen E. Weston & Thomas J. McCarthy, Federal Antitrust Law, 4th ed. (St. Paul:
West, 1981) at 413: A cash tender offer is an invitation by the management o f the acquiring firm to die share
holders o f the acquired firm to trade in their shares at a fixed date for a fixed pnce.
282
In the matter of Precision Castparts Corp. and Wyman-Gordon Co., FTC File No. 991-0240, Complaint o f Nov. 9th,
1999 at para. 12 [hereinafter in the matter o f Precision Castparts Corp. and Wyman-Gordon Co., Complaint].
33 ibid at paras. 9-10; according to the definitions given by the FTC investment casting means a method o f
manufacturing metal components whereby a wax model o f the metal component is dipped into a ceramic
slum- which dries to form a ceramic shell. The wax is then removed using a special furnace, leaving a cavity
within the ceramic shell into which molten metal is poured. Once the metal cools, the ceramic shell is re
moved producing dimensionally precise metal components. Aerospace investment cast components means
dimensionally precise metal components manufactured using the investment casting process that are used
primarily in aerospace jet engines and aerospace airframe applications; in the matter o f Precision Castparts Corp.
and Wyman-Gordon Co., FTC File No. 991-0240, Decision And Order o f Dec. 17th, 1999 at 5 [hereinafter in the
matter o f Precision Castparts Corp. and Wyman-Gordon Co., Decision And Order].
384 In the matter of Precision Castparts Corp. and Wyman-Gordon Co., Complaint, supra note 282 at para. 14.
285 ibid at paras. 15-17.
42
augmented danger of both unilateral price increases and coordination between the rem a in in g
firms, and the diminution o f innovation activities.2*6 Market entry was believed to be highly im
probable in view of the required time-consuming set up o f sophisticated manufacturing and
developing facilities as well as the possession o f significant engineering know-how.2*
For these concerns the FTC issued a consent order on Dec. 17th, 1999 ordering the dives
titure o f substantial assets o f Wyman-Gordon.2** First, Wyman-Gordon had to divest its tita
nium aerospace investment cast components in Oregon within six months of sig n in g .2*9 A sec
ond divestiture referred to Wyman-Gordons investment casting manufacturing plants, located
in Connecticut, and all assets used in the production o f titanium aerospace investment cast
components and stainless steel and/or nickel-based superalloy aerospace investment cast com
ponents at the Groton facility to either Doncasters, p.l.c. - a British competitor or another
acquirer to be approved by the FTC within a six month period.290
3.
T h e A ir c r a f t I n d u s t r y : B o e i n g C o . An d M c D o n n e l l -D o u g ia s C o r p .
On July 1, 1997 the FTC closed its investigation into the proposed merger o f the Boeing
Company (Boeing) and the McDonnell-Dougias Corp. (McDonnell-Dougias) the first- and
third-largest aircraft manufacturing companies of the world a transaction that was valued at
U.S. S 15 billion.291 Generally, closing an investigation signals approval on the basis o f the facts
known bv the FTC.292
Distinguishing between the commercial and m ilita ry aircraft sectors, the F T C focused on
the research, developing, manufacturing, and sale o f civil aircrafts.293 Absent any overlap be
tween the activities of the merging parties in the military7 sector, the Agency7denied that there
was a threat to competition.294 P e rta in in g to commercial aircraft manufacturing, the F T C identi
fied only three market participants: Boeing (market share: approx. 70%), the European Airbus
286
28'
288
289
290
291
292
293
ibid. at para. 19 (a)-(e).

ibid at para. 18.
In the matter o f Precision Castparts Corp. and Wyman-Gordon Co., Decision And Order, supra note 283.
ibid at 15.
ibid at 27.
In the matter o f The BoeingCompany and McDonnell Douglas Corp.,Statement o f ChairmanRobert Pitofsky et al.
o f July l \ 1997, 5 TradeReg. Rep. (CCH) ^ 24295 (1997) [hereinafter in the matter o f The BoeingCompany and
McDonnell Douglas Corp., Statement].
Kevin Arquit & Richard Wolfram, "Mergers And Acquisitions: United States Government Antitrust Analysis
And Enforcement (1999) 1116 PLI/Corp 425 at 468.
In the matter o f The Boeing Company andMiDonnell Douglas Corp., Statement, supra note 291 at 24295.
43
Consortium (market share: approx. 30O/o)29:>, and McDonnell-Douglas (market share: approx.
l o). The market share of McDonnell-Douglas had in the preceding years seen a sharp decline
and it was alleged by the parties that the acquired firm would most likely exit the market without
the consummation of the transaction. Furthermore, in examining the future importance of
McDonnell-Douglas the FTC found that its role was overstated by its past market share.296 The
Agency declared to have found convincing evidence including the evaluation o f interviews
with representatives of more than 40 airlines that McDonnell-Douglas no longer constituted
a meaningful competitive force.29 The FTC could not discern any alternative to the merger
capable to ensure McDonnell-Douglas5 economic survival, as McDonnell-Douglas had ne
glected to investment in new products, research and development, and the upgrading o f existing
production facilities. Boeing affirmed that the take-over would preserve 14000 o f the existing
jobs of McDonnell-Douglas as well as lead to substantial efficiency gains.298 A noteworthy point
in the Agency5s reasoning was its assertion that the approval had not been based on the failing
firm defense but on the conclusion that competition had never been threatened by the
merger. 299
The transaction gained explosiveness55 from the severe objections made by the European
Commission which initially planned to enjoin the merger, but eventually issued an approval after
some concessions were made by the parties. Boeing agreed not to enforce the 20-year exclusive
contracts of aircraft supply to Delta, American, and Continental A irlines that had been entered
into shortly before the merger.300 Whether the backing down of the European Commission was
the result o f political pressure by the Clinton administration, or rather based on the substance of
the concessions made, is disputable.301
294
ibid.
295
296
The Airbus Consortium consists o f four enterprises: Daimler-Benz Aerospace Airbus o f Germany owning
37.9 o, British Aerospace owning 20%, Aerospatiale o f France owning 37.9%, and CASA o f Spain owning
4.2 o.
In the matter o f The Boeing Company and McDonnell Douglas Corp., Statement, supra note 291 at 24295.
29
ibid.
SB
Kathleen Luz, The Boeing-McDonnell Douglas Merger: Competition Law, Parochialism, And The Need For
A Globalised Antitrust System5 (1999) 32 Geo. Wash. J. Intl. L. & Econ. 155 at 158.
In the matter o f The Boeing Company and McDonnell Douglas Corp., Statement, supra note 291 at 24295. This
argument, though, was not newly invented as it had been used by the District Court in United States v. General
Dynamics, Inc., supra note 19; see also 1984 Merger Guidelines, supra note 13 sec. 3.22, a provision that was
eliminated in the 1992 Merger Guidelines.
EC, Commission Decision 97/816 o f July 30th, 1997, [1997] O. J. L 336/16 "Boeing/McDonnell-Douglas. The
FTC had these contracts merely designated to be troubling and announced a close monitoring o f the situa
tion, in the matter o f The Boeing Company and McDonnell Douglas Corp., Statement, supra note 291 at f 24295.
44
4.
T h e D e f e n s e In d u s t r y
a)
M a r t in M a r ie t t a C o r p . A n d G e n e r a l D y n a m ic s C o r p .
In 1994 Martin Marietta Corp. (Martin Marietta) announced the acquisition of the Space
Systems Division o f the General Dynamics Corp. (General Dynamics).302 Martin Marietta was a
manufacturer o f satellites whereas General Dynamics produced launching systems for certain
types o f satellites; the transaction was, therefore, a vertical integration. The FTC claimed that
the acquisition of General Dynamics Space Systems Division would grant Martin Marietta ac
cess to sensitive information about its competitors on the satellite market thereby giving it an
unfair advantage.303 Likewise the Agency feared a reduction o f the innovation efforts.304 In a
consent agreement Martin Marietta acquiesced to the erection o f an information barrier be
tween its launcher and its satellite manufacturing divisions. Confidential information given to
the launcher division must not be used in satellite manufacturing, and customers of the launcher
division have to be notified o f the agreement before confiding any information.305
b)
L o c k h e e d M a r t in C o rp . A n d L o r a l C o rp .
In early 1996 the Lockheed Martin Corp. (Lockheed Martin) entered into an agreement
with the Loral Corp. (Loral) regarding (1) the acquisition o f all outstanding stock votes o f the
latter by the former, (2) the transfer o f the space and telecommunications businesses o f Loral
and its subsidiaries to Loral Space Corp. (Loral Space), and (3) Lockheed Martins acquisition of
a 20 o convertible preferred stock interest in Loral Space, which in turn owns a 33 b interest in
Space Systems/Loral as well as a series of other transactions.306 Both parties pursue a variety of
activities with regard to both civil and military air traffic.30 Thus, the FTC detected multifarious
301
K. Luz, supra note 298 at 155: Charles Brenner & Tom Rhodes, EU Decides Not To Block Boeing Merger
Tht Times (July 24th, 1997) 26.
302 In the matter o f Martin Marietta Corp., FTC Docket No. C-3500, Proposed Consent Agreement And Analysis
To Aid Public Comment o f April 12th, 1994, 59 F.R. 17379.
303 ibid.
304 ibid
305 In the matter o f Martin Marietta Corp., FTC Docket No. C-3500, Consent Order o f July 20th, 1994, 59 F.R.
37045.
306 In the matter o f Lockheed Martin Corp., FTC File No. 961-0026, Complaint o f Sept 19th, 1996 at para. 21.
x ~ ibid at paras. 17-19.
45
sectors in this area as relevant product markets.308 The U.S. were recognized as the relevant geo
graphic market.309
The FTC assumed that the acquisition o f Loral, one o f the largest air traffic control systems
suppliers, by Lockheed Martin, the SETA contractor o f the Federal Aviation Administration
(FAA), would give the merged entity access to sensitive information about Lorals competitors
in the air traffic control systems market and most likely lead to a reduction in quality.310 The
same concerns were uttered by the Agency' with respect to the access to sensitive information
concerning competitors in the military' aircraft and unmanned aerial vehicle market.311 For the
markets o f commercial low earth orbit satellites and commercial geosynchronous earth orbit
satellites, the FTC expected a reduction o f competition, the danger o f coordinated behaviour,
an increase o f prices, and the reduction o f quality.312 Timely, likely', and sufficient market entry'
was highly unlikely as the high-tech character o f the business in question required substantial
technical know-how and major investments.313
The FTC, which consulted closely with the Department o f Defense (DOD) on the terms o f
the settlement, imposed several prohibitions, divestiture requirements and firewalls as condi
tions for approving the acquisition. Lockheed Martin had to divest its SETA contract with the
FAA to an acquirer to be approved by the FTC.314 Lockheed Martins space division was barred
from providing any information or facilities to Loral Space and the maximum interest allowed
was confined to 20 o.315 Furthermore, persons who simultaneously served as board members or
officers in both companies were prohibited from any participation in Lockheed Martins space
business.316 Lockheed Martin was required to erect a firewall between its aircraft and its air
craft component division in order to prevent the flowing o f any information about Lockheeds
aircraft manufacturing competitors from the latter to the former.31
308
309
310
311
312
313
314
316
31 *
ibid. at para. 22: the research, development, manufacture and sale o f (a) Air Traffic Control Systems; (b) SETA
Services; (c) Commercial Low Earth Orbit Satellites; (d) Commercial Geosynchronous Earth Orbit Satellites;
(e) Military Aircraft; (f) NlTE Hawk Systems; (g) Simulation and Training Systems; (h) Electronic Counter
measures; (i) Mission Computers; (j) Unmanned Aerial Vehicles; (k) Integrated Communications Systems.
ibid at para. 23.
ibid at para. 36 (a) (1), (2).
ibid at para. 36 (g), (h).
ibid at para. 36 (c)-(f)
In the matter o f Lockheed Martin Corp., FTC File No. 961-0026, Proposed Agreement And Analysis To Aid
Public Comment o f April 29th, 1996, 61 F.R. 18732.
ibid
ibid
ibid
46
5.
I n n o v a t io n M a r k e t s
a)
M ic r o s o f t C o r p . A n d I n t u i t , I n c .
In 1995 the Microsoft Corp. (Microsoft) agreed to purchase the entire stock o f its com
petitor Intuit, Inc. (Intuit) for the price o f U.S. S 2 billion.318 Microsoft is the worlds largest and
most powerful developer o f personal computer software whereas Intuit is the dominant pro
ducer o f personal finance and checkbook software (PF/Checkbook).319 Microsoft also has a
dominant position in operating systems for IBM-compatible personal computers (PCs) and for
many applications.320 At the time o f the DOJs decision, the relevant market identified as the
development and sale o f PF/Checkbook software for IBM-compatible PCs321 was highly con
centrated. The leading product, Intuits Quicken, accounted for a market share o f 69% or 7
million customers in the U.S. while Microsofts Microsoft Money, in second place, had a
share of 22%. The DOJ found that the introduction o f Microsoft Money in 1991 had significandy increased competition and lowered prices.322
When the DOJ quashed the transaction, it claimed that its anticompetitive effects went well
beyond ordinary PF software but meant a threat to competition in all areas o f PC-based homebanking and the emerging field o f E-commerce, as the products in question form an important
springboard being the link between traditional application software and internet-related
applications.323 The DOJ produced considerable evidence that even the parties saw themselves
as strategic cornerstones o f the home-banking and E-commerce business and recognized that
in the absence of the merger there would be virulent competition.324 The merging o f Microsoft
and Intuit would eliminate any competition on the relevant market, and according to the DOJs
318 United States v. Microsoft Corp. and Intidt, Inc., Complaint, supra note 92 at para. 3.
PF/Checkbook software is designed to give the home PC user electronic control over an integrated set o f
personal finance records and transactions. Currently, the core integrated functions o f PF/Checkbook software
products include an electronic checkbook, which automates check writing and check register record keep
ing, household budgeting, personal asset and liability tracking and reporting, including features such as loan
tracking, stock and bond portfolio tracking, home inventories, cash and retirement account tracking and per
sonal financial statements, and front end software for automated bill-paving in association with a bill-paying
service.
3:0 United States v. Microsoft Corp. and Intuit, Inc., Complaint, supra note 92 at para. 9.
321 ibid at paras. 13, 18.
3 ibid at 1.
324 ibid at para. 2.
319
47
allegations, lead to price increases and a significant reduction in innovation activity an essential
part of the incumbents striving for market shares.325
Being aware of the competitive uneasiness their proposal would generate, the parties had
devised a fix. Microsoft had offered a partial transfer o f its Microsoft Money business to a
third party, Novell, Inc. Yet, this transfer was limited to the computer code and associated in
tellectual property and documentation, as well as a customer list and assistance for a brief tran
sition period. The human resources, most important for success in innovation markets, would
eventually remain at Microsoft.326 The DOJ therefore observed that the competition by Novell,
Inc. would be at best a weak substitute for the viable concurrence o f Intuit32
New entry was not expected for the foreseeable future. The only further competitors o f
Microsoft and Intuit H & R Block Financial with its Make Your Money and Computer As
sociates offering Simply Monet had, since their market entry7, not reached a combined share
o f more than 5 o.328 Also, the DOJ perceived that the broad base o f customers o f Microsoft and
Intuit produced a steady flow of revenue which allowed relatively low initial prices. Consequendy, any market entrant would have to face a period o f constant losses stretched over years
before having the possibility7to recoup its investments by upgrade revenues a factor that was
deemed highly deterring. Finally, the sale o f a new product to original equipment manufacturers
(OEMs) and retailers requires a certain reputation that would have to be established by any
market entrant before succeeding.329 Because o f its massive concerns with regard to the mergers
effects on competition, the DOJ sought permanent injunctive relief from the court. However, in
order to avoid a long and cosdy confrontation, Microsoft eventually dropped its bid on May
20th, 1995.
b)
Sil ic o n G r a p h ic s , I n c ., A lia s R e s e a r c h , I n c ., A n d W a v e f r o n t T e c h n o l o g ie s ,
In c .
In February 1995, Silicon Graphics, Inc. (SGI), a California manufacturer of computer

workstations, agreed to purchase Alias Research, Inc. (Alias) and Wavefront Technologies, Inc.
ibid. at 13 and para. 4.

ibid at para. 26.
ibid at paras. 3, 29-31.
ibid at paras. 20, 21.
ibid at para. 22, 23.
48
(Wavefront), two producers of two- and three-dimensional computer graphics software for en
tertainment and industrial markets.330 The software tools created by Wavefront and Alias are
used by film-makers and game-makers who are major customers o f Silicon Graphics worksta
tions. SGI entered into the acquisition hoping to ward off competition from Microsoft Corp.,
which had previously purchased Alias and Wavefronts biggest competitor, Soft Image, Inc.
(Soft Image).331
The FTC challenged the transaction for the reason that it, as originally structured, could
decrease substantially competition for entertainment-graphics software and workstations.332 The
then market share o f Silicon Graphics was 900/o o f the market for workstations that ran enter
tainment-graphics software. Such software had been developed almost exclusively for use on
Silicon Graphics workstations. In addition, the staff concluded that since Alias, Wavefront, and
Soft Image, are industry' standards, other workstations must be able to run their software in
order to compete successfully.333 Thus, the Commission concluded that the acquisitions would
reduce competition through two types of vertical foreclosure: (1) nonintegrated software ven
dors would be excluded from the SGI platform; and (2) rival hardware manufacturers would be
denied access to Alias and Wavefront software, without which they cannot effectively compete
against SGI.334
Even though the acquisition mainly raised vertically related concerns, the Agency also
feared restraints o f competition on a horizontal level given that SGI itself develops entertain
ment software. On the grounds that the parties could produce evidence that, in this respect, the
transaction would be appreciated by customers for the complementary- interaction o f the hori
zontal components and lead to significant efficiencies, the FTC forewent any challenges o f these
horizontal effects.335 SGI eventually agreed to a consent order that required the transfer o f its
software to a competing workstation manufacturer, and that it maintains an open architecture
and provide access to software developers on nondiscriminatory terms.334
330
331
332
In the matter o f Silicon Gmpbics, Inc., FTC File No. 951-0064, Proposed Consent Agreement And Analysis To
Aid Public Comment o f July 5th, 1995, 60 F.R. 35032.
ibid. at 35034.
ibid at 35035.
335
336
ibid
ibid
49
I I. M e r g e r s I n v o l v in g N o n -A m e r ic a n F ir m s
1.
T h e O i l M a r k e t -. B r it is h
p e t r o l e u m p .l . c .
A n d Am o c o C o r p .
Pursuant to an Agreement and Plan o f Merger o f August 11*, 1998, the British Petroleum
p.Lc. (BP) a British corporation engaged in various sectors o f the oil and gas market and the
U.S. American Amoco Corp. (Amoco) likewise an integrated chemical products and petro
leum company merged around December 31, 1998 into the new entity British Petroleum
Amoco p.Lc. (BP Amoco) by a stock swap valued at U.S. S 48.2 billion. 60% of the shares o f the
combined firms are held by former BP shareholders, the new entity thus operating under British
law.33'
Although the activities o f the parties did not significantly overlap,338 the FTC identified the
following two as lines o f commerce affected by the merger (1) the terminaling o f gasoline and
other light petroleum products339 and (2) the wholesale sale of gasoline.3*0 The FTC found that
both product markets were geographically limited to a number o f metropolitan areas.341 The
local terminaling markets were either moderately or highly concentrated, displaying pre-merger
HHIs from 1300 to 2500, a concentration that increased in all areas by more than 100 points to
between 1500 and 3600.342 With regard to the gasoline wholesale markets, the FTC stated that
their concentration levels increased by more than 100 points to levels of between 1400 and
1800.343 The staff members claimed that in all metropolitan markets concerned, the market
share o f the four leading firms exceeded 70%, in 15 o f those markets being greater than 80%.344
In the matter o f British Petroleum Co. p.Lc., Amoco Corp., BP Amoco Corp., FTC File No. 981-0345, Complaint o f
April 19th, 1999 at paras. 1-11 [hereinafter in the matter o f British Petroleum Co. p.Lc., Amoco Corp., BP Amoco
Corp., Complaint].
In the matter o f British Petroleum Co. p.Lc., Amoco Corp., BP Amoco p.Lc., FTC File No. 981-0345, Statement o f
Chairman Robert Pitofskv and Commissioners Sheila F. Anthony and Mozelle W. Thompson at 2 [hereinafter
in the matter o f British Petroleum Co. p.Lc., Amoco Corp., BP Amoco Corp., Statement].
339
In the matter o f British Petroleum Co. p.Lc., Amoco Corp., BP Amoco Corp., Complaint, supra note 337 at para. 13.
340 ibid. at para. 18.
341 Terminaling markets: Cleveland, Ohio; Chattanooga and Knoxville, Tennessee; Jacksonville, Florida; Merid
ian, Mississippi; Mobile and Montgomery, Alabama; and North Augusta and Spartanburg, South Carolina, ibid
at para. 14.
Wholesale markets: Albany, Georgia; Athens, Georgia; Birmingham, Alabama; Charleston, South Carolina;
Charlotte, North Carolina; Charlottesville, Virginia; Clarksville, Tennessee; Cleveland, Ohio; Columbia, South
Carolina; Columbus, Georgia; Cumberland, Maryland; Dothan, Alabama, Fayetteville, North Carolina; Flor
ence, Alabama; Goldsboro, North Carolina; Hattiesburg, Mississippi; Hickory, North Carolina; Jackson, Ten
nessee; Memphis, Tennessee; Meridian, Mississippi; Mobile, Alabama; Myrtle Beach, South Carolina; Pitts
burgh, Pennsylvania; Raleigh, North Carolina; Rocky Mount, North Carolina; Savannah, Georgia; Sumter,
South Carolina; Tallahassee, Florida; Toledo, Ohio; and Youngstown, Ohio, ibid at para. 19.
In the matter o f British Petroleum Co. p.Lc.. Amoco Corp., BP Amoco p.Lc., Statement, supra note 338 at 2.
50
The consummation o f the transaction would lead to the elimination o f any competition
between the parties and increase the likelihood o f coordinated behaviour that would eventually
result in increases of the prices for term in alin g and gasoline.145 Again, it was pointed out that
product homogeneity and market transparency connected thereto would strongly help the
emergence o f coordinated behaviour.346 The possibility o f entry that could offset the anticom
petitive effect o f the merger was rejected, such a decision justified by unpersuasive evidence of
precedent entry.14
To resolve these problems, the Commission issued a Decision And Order containing a
number of structural remedies.148 With regard to the te rm in a lin g markets, this document calls
for one o f the parties Amoco to divest the terminaling facilities it possesses in the relevant
markets to Williams Energy Ventures, Inc. - a subsidiary o f the Williams Companies, or to an
other acquirer.149 To mitigate the alleged anticompetitive effect on the wholesale market for
gasoline, the Decision And Order requires the parties to divest their retail assets in all the geo
graphic markets identified.150 Finally, the parties are obliged to notify their branded sellers within
a certain period giving them an option to cancel the existing supply contracts without any pen
alty.151 This particular provision of the Decision And Order concerns some 1600 gas stations in
the metropolitan areas concerned. For a period o f two years, the parties are barred from engag
ing in any sale or soliciting sales of their branded products to the retailers who opt to cancel the
contracts.152 For a period o f ten years they must not acquire any interest in market participants
offering terminaling services or gasoline retail assets in certain areas identified in an appendix to
the Decision And Order, without giving notice to the Commission in advance.151
345
346
w
348
349
350
351
35353
In the matter o f British Petroleum Co. p.Lc., Amoco Corp., BP Amoco Corp., Complaint, supra note 337 at paras. 23
(a), (b), 25 (a), (b).
In the matter o f British Petroleum Co. p.Lc., Amoco Corp., BP Amoco p.Lc., Statement, supra note 338 at 3.
ibid.-. in the matter of British Petroleum Co. p.Lc., Amoco Corp., BP Amoco Corp., Complaint, supra note 337 at paras.
16, 21. With regard to the wholesale of gasoline Commissioner Swindle dissented and contended that whole
salers customers could, contrary to the majoritys findings, react flexibly to market changes and therefore the
threat o f a sufficient quantity switching to a competing supplier would deter any collusive behaviour o f the in
cumbents, in the matter o f British Petroleum Co. p.Lc., Amoco Corp., BP Amoco p.Lc., ETC File No. 981-0345,
Statement o f Commissioner Orson Swindle, Concurring in Part, Dissenting in Part at 3-4 [hereinafter in the
matter o f British Petroleum Co. p.Lc., Amoco Corp., BP Amoco p.Lc., Statement Swindle].
In the matter o f British Petroleum Co. p.Lc., Amoco Corp., BP Amoco p.Lc., FTC File No. 981-0345, Decision And
Order o f April 19th, 1999.
ibid at II.
ibid at III. This totals 134 gas stations to be sold. The divestiture o f certain retail assets in Ohio has to occur
under the condition that those BP or Amoco branded fuel sellers cease buying branded fuels from the parties,
ibid at V.
ibid at IV. 1., 2
ibid at IV. 3.
ibid at M I, Appendix A.
51
2.
T h e S t im u l a n t I n d u s t r y : G u in n e s s
D ia g e o
p . l . c .,
G r a n d M e t r o p o l it a n
p . l . c .,
An d
p . l .c .
In 1998 the FTC approved the merger of the British companies Guinness p.Lc. (Guinness)
and Grand Metropolitan p.l.c. (Grand Metropolitan) to form Diageo p.l.c., the worlds seventhlargest food and drink company.354 The transaction was valued at some U.S. $ 36 billion. Both
o f the parties were engaged in the production and sale o f distilled spirits in the U.S.; the relevant
line of commerce recognized by the Commission being the production and sale o f (1) premium
Scotch and (2) premium gin.355
Even though it would have been of considerable interest to be acquainted with the factors
taken into consideration when assessing the substitutability o f the relevant products by other
distilled spirits, the Commission solely referred to retail prices as decisive for the market de
lineation a market definition that was not adopted unanimously.356 Commissioner Azcuenaga
strongly dissented.35 She argued that it wrongly excluded products not marketed throughout the
U.S. as well as domestically bottled spirits. Identifying former FTC decisions, she contended
that the use o f pricing to separate markets was not justified as alcoholic beverages compete well
within a certain range with products above and below their prices. Ultimately, however, she
agreed with the conclusion that the merger would violate competition, even on the assumption
o f a broader relevant m arket358 Geographically, the FTC determined the U.S. to be the section
of the country affected.359
354 In the matter o f Guinness p.Lc., Grand Metropolitan p.Lc., and Diageo p.Lc., FTC File N7o. 971-0081, Final Consent
ot April 21, 1998 [hereinafter in the matter o f Guinness p.Lc., Grand Metropolitan p.Lc., and Diageo p.Lc., Final
Consent].
355 In the matter o f Guinness p.Lc., Grand Metropolitan p.Lc., and Diageo p.Lc., FTC File No. 971-0081, Complaint o f
April 17th, 1998 at paras. 1-10 [hereinafter in die matter o f Gmnness p.Lc., Grand Metropolitan p.Lc., and Diageo
p.Lc., Complaint]: Guinness premium Scotch brands in the United States were Johnnie Walker Red and De
wars White Label, its premium gin brands in the United States were Tanqueray gin and Tanqueray Malacca
gin. Grand Mets premium Scotch brands in the United States included J&JJ Rare, J&B Select, and The Fa
mous Grouse. Its premium gin brands in the United States were Bombay Original and Bombay Sapphire. At
para. 16: The Commission defined these products as spirits destilled and bottled in the U.K.
35' In the matter o f Guinness p.Lc., Grand Metropolitan p.Lc., and Diageo p.Lc., FTC File No. 971-0081, Separate State
ment o f Commissioner Mary L. Azcuenaga Concurring in Part and Dissenting in Part o f April 17th, 1998
[hereinafter in the matter o f Guinness p.Lc., Grand Metropolitan p.Lc, and Diageo p.Lc., Separate Statement].
358 ibid
359 In the matter o f Guinness p.Lc., Grand Metropolitan p.Lc., and Diageo p.Lc., Complaint, supra note 355 at para. 19.
52
The assessment o f the mergers alleged anticompetitive effect relied solely on market con
centration figures. Both relevant product lines revealed a degree o f high concentration prior to
the transaction which would even be exacerbated as a result o f the merger.360 From these figures
the staff laconically deduced the standard anticompetitive effects to be expected: uni- and col
lateral exercise of market power resulting in higher prices for prem iu m Scotch and premium
361
gin.
To remedy the alleged anticompetitive effects, the parties consented to the world-wide di
vestiture o f the Dewars Scotch business by Guinness and both Bombay gin brands by Grand
Metropolitan within the usual period o f six months.362 Apparently, the FTC took into account
the importance of the brands and the necessity o f an uninterrupted supply with the ingredients
needed to produce the high quality for which the brands are known, as it repeatedly referred to
the brands as being part of the assets to be divested, and expressly included an obligation o f the
parties to ensure continuing supply to the acquirer.
3.
T h e M e t a l I n d u s t r y : F e d e r a l -M o g u l C o r p . A n d T & N
p .l .c .
A nother challenged transaction involving a Non-U.S. firm was the acquisition o f T&N p.l.c.
(T&N), a British firm, by the Federal-Mogul Corp. (Federal-Mogul), a Michigan-based corpora
tion.363 T he Commission concluded that the merger was likely to lessen competition on four
relevant product markets: (1) the development, manufacture and sale o f fluid film or plain
thinwall bearings364 and (2) the development, manufacture and sale o f thinwall bearings for use
in automobile and light truck engines (light duty engine bearings) and which are sold to
OEMs for use in the manufacture of engines365, (3) the development, manufacture and sale of
thinwall bearings for use in heavy truck engines and heavy equipment engines (heavy duty en
gine bearings) and which are sold to OEMs for use in the manufacture o f engines366, and (4)
360 ibid. at para. 22: In the premium Scotch market the combined shares o f the parties would accrue to 92%, gen
erating a HHI of 8000 after an increase o f more than 3000.
ibid at para. 23: In the premium gin market the combined market share would be 73% with a post-merger
HHI o f 6000 after an increase o f 1700.
36- In the matter o f Guinnessp.Lc., Grand Metropolitan p.Lc., and Diageo p.Lc., Final Consent, supra note 354 at I., II.
363 In the matter o f Federal-Mogul Corp. and T~N p.Lc., FTC File N'o. 981-0011, Complaint o f Dec. 4th, 1998 at
para. 4: The proposed purchase o f all outstanding stock voting securities reached a volume o f U.S. S 2.4 bil
lion [hereinafter in the matter o f Federal-Mogul Corp. and TerN p.Lc., Complaint].
53
the manufacture and sale of light dun- engine bearings and heavy dun- engine bearings which are
sold to the automotive and truck aftermarket.36
Thinwall bearings are devices used in engines and several other industrial applications to
separate two materials from each other in order to prevent friction and subsequent damage.36*
The distinction between the four categories o f thinwall bearings had to made because bearings
have to be specially designed to the effect that they can only comply with the exigencies o f a
single end use, a detail which impedes any substitutability.369 The Commission based its allega
tions of competitive harm on the assumption o f a world-wide geographic market. The staff
stated that the purchase of the relevant products could occur and apparently did from any
supplier o f thinwall bearings throughout the wodd as long as the requirements imposed by the
specific construction of an engine and legislation are m et3 0
Nonetheless, the measurement of market concentration was based on the U.S. market for
thinwall bearings alone. Again, the FTC argued that the products had to meet the applications
requirements o f the customers. All relevant lines o f commerce in the U.S. were found to be
highly concentrated with the proposed acquisition leading to HHIs from 6500 to 7200.3 1 Alleg
edly, the merger would lead to the elimination o f competition between the parties and generate
a likelihood o f unilaterally exercised market power, in addition to probable collateral increases
o f prices by Federal-Mogul and its competitors on the heavy duty' engine market. Furthermore,
it was argued that the incentive to invest in innovation would be su b stan tia lly reduced, as well as
the quality and availability of the relevant products.3 2 The assumption o f new entry into these
markets was not accepted by the FTC, who primarily pointed to the fact that the setting up o f
the required facilities and the development o f the relevant products required substantially longer
than two years for the reason o f intensive testing and because o f the specifications requested by
customers.3 3 As for successful entry into the aftermarket for bearings, the FTC contended that
it required the ability to offer not only devices for engines currently construed, but also bearings
36
368
369
3~0
3 '!
3 '2
ibid. at para. 8.
ibid at para. 5.
ibid at paras. 5-8.
ibid at paras. 14-17: (1) plain thinwall bearings: Combined post-metger market share o f 83%, post-merger
HHI o f over 7000, increase o f 3300; (2) light duty engine bearings: Combined post-merger market share o f
81%, post-merger HHI of over 7000, increase o f over 3000; (3) heavy duty engine bearings: Combined postmerger market share o f 84%, post-merger HHI o f over 7200, increase o f over 2800; (4) aftermarket bearings:
Combined post-merger market share o f 79%, post-merger HHI o f 6500, increase o f over 2500.
ibid at para. 24 (A)-(E).
54
fitting into most o f the engines manufactured during the last 30 to 40 years. As each bearing
requires its unique tooling and the demand for older models is declining, any new entrant would
face an extremely deterring risk o f substantial sunk cost.3 4
A consent order issued by the Commission in December 1998 required the parties to divest
a variety of manufacturing facilities to the approved acquirer Dana Corp.35 The assets to be
divested encompassed mainly former T&Ns research and manufacturing facilities in the U.S. as
well as in Europe.3 6 In order to ensure the viability o f the divested entities, the Final Consent
Order explicidy names employees having worked on research and development of bearings and
requires Federal-Mogul to assign these people to the divested business.3 In addition, FederalMogul was prohibited from entering into any form o f cooperation with the Japanese firm Daido
Metals, Inc., with which T&N had formerly entered a joint venture agreement in order to allow
continued cooperation between the Japanese firm and the divested business. Finally, the FTC
complied with a request from Federal-Mogul to name certain businesses to be divested in the
order that were engaged in the manufacture of polymer coating. This naming occurred in order
to respond to concerns raised by the Cartel Office o f the Federal Republic of Germany and to
eliminate the necessity of entering a separate agreement with the German authority.3 8
4.
T h e C hemicals I ndustry : E. I. D u P o n t d e N emours & C o. An d D egussa AG

On July 30th, 1997 the E. I. DuPont de Nemours & Co. (DuPont) and the German Degussa
Aktiengesellschaft (Degussa AG), the latter one acting through its wholly owned, New-Jersey
based subsidiary Degussa Corp., signed a Letter o f Intent according to which Degussa Corp.
would acquire DuPonts entire world-wide business o f hydrogen peroxide, encompassing some
three production plants in North-America, for the price o f U.S. S 325 million.3'1 After the par
ties had been informed by Commission staff about possible concerns with regard to the effects
o f the transaction on competition, the scope of the acquisition was reduced to DuPonts hydro
gen peroxide plant in Gibbons, Alberta.
3~ ibid. at paras. 19-20.

3'5 In the matter o f Federal-Mogul Corp. and TcrN p.Lc., FTC File No. 981-0011, Final Consent Order o f Dec. 9th,
1998 at II.
376 ibid. at I.I.
3_ ibid at II.I,Appendix II
378 ibid at I.
3'9 In the mattero f Degussa Aktiengesellschaft and Degussa Corp., FTC File No. 971-0118, Complaint o f June 10th,
1998 at para. 7.
55
The Commission staffs findings were that the line o f commerce affected was the manu
facture, marketing and sale o f hydrogen peroxide, a chemical that is commonly used as a
bleaching agent, particularly in the paper and pulp industry and by textile manufacturers.380
For the reason that the transport of hydrogen peroxide can only occur in aqaeus solution, re
quiring costly carriage devices and rendering overseas transportation economically unfeasible,
the Commission confined the relevant geographic market to North-America.381 Allegedly, the
pre-merger concentration level on that market was substantially high. The transaction as origi
nally proposed would have raised the HHI by 575 points to 2544, leaving only three manufac
turers with a combined market share of 810/o.382 The added market shares o f the parties would
amount to 37 o.
The FTC found that the possibility o f new market entry did not meet the requirements of
section 3 o f the 1992 Merger Guidelines. This contention was chiefly based on the requirement
o f a considerable minimum viable scale (MVS), L e. the m in im al, economically practicable size
o f production facilities, that caused significant cost This investment was unlikely to be re
couped in the case of a market failure as the technology used in the production o f hydrogen
peroxide can only be used for this unique purpose, and production cannot be shifted to a more
profitable product The deterring effect is further exacerbated by the existing overcapacity in the
relevant m arket383 Owing to the concentration level, the FTC assumed a high probability of
coordinated interaction in a post-merger setting. From the staffs point o f view, this deduction
was supported by the market-specific history o f collusion between European hydrogen peroxide
producers in the 1960s and 1970s, which would be the leading manufacturers in North-America
after the merger. The markets particular vulnerability was also backed up by the argument that
hydrogen peroxide was a homogeneous product purchased p rim arily on the basis o f price.384
The FTC also referred to large price differentials between different customers which, in the eyes
o f the Agency, was an indication o f already occurring price coordination.385
380 ibid. at paras. 9, 10.

382 ibid. at para. 13. The Commission, however, expressly stated that the modified agreement would not affect die
market concentration at all.
384 In the hydrogen peroxide industry delivered pricing, i. e. the advance announcement of price increases, and
customer arrangements including meet-or-release clauses, are widespread. Thus, pricing data are easily avail
able and the market is fairly transparent. Product homogeinity further facilitates coordinated behaviour by
making deviation from the agreed terms more difficult.
385 ibid at para. 19 (a)-(h).
56
By a Decision And Order also issued on June 10th, 1998, the parties were barred from im
plementing the transaction other than in the reduced manner, via., possible acquisitions o f
DuPonts hydrogen peroxide production facilities were limited to the plant in Gibbons, Alberta
for the period o f ten years, whereas the plants located in Memphis, Tennessee and Mainland,
Ontario are to be retained by D u P o n t3*6 Besides, Degussa Corp. has to refrain from acquiring
any interest exceeding lo3* in any other manufacturer o f hydrogen peroxide in North-America
or assets usable in the production o f the relevant product valued at more than U.S. S 15 million
until June 10*, 2008.3**
5.
I n n o v a t io n M a r k e t s
a)
U p j o h n C o . A n d P h a r m a c ia A k t ie b o l a g
In February 1996 the FTC issued a complaint containing charges that the U.S. S 13.9 billion
merger between the pharmaceutical companies o f Upjohn Co. (Upjohn) and Pharmacia Aktie
bolag of Sweden (Pharmacia) would harm competition in the market o f research and develop
ment for cancer treatment.389 The agreement as initially proposed would have created a pharma
ceutical manufacturer ranking among the top ten wodd-wide, and fifth in the U.S.390
The competitive concerns o f the FTC were not primarily related to the sheer size of the
combined entity. The Commission identified the research, development, manufacture, and sale
o f certain pharmaceutical products specifically designed for the treatment o f colecteral cancer as
the line of commerce mainly affected by the merger. These products were designated as topoisomerase I inhibitors391 which are a specific class o f chemotherapeutic drugs that inhibit the
multiplication of cancer cells inside the body. By c u r tailing cancer cell growth, topoisomerase I
inhibitors may aid in the treatment o f colorectal cancer, a form o f cancer that does not respond
386
38~
388
389
390
391
In the matter o f Degussa Akticngesellscbaft and Degussa Corp., FTC File N o. 971-0118, Decision And Order o f
June 10th, 1998 at II [hereinafter in the matter o f Degussa Aktiengesellschaft and Degussa Corp., Decision And Or
der]. Degussa was prohibited from acquiring more than a 1% interest in the retained plants, directly or indi
rectly.
Or, for investment purposes 5 o.
In the matter o f Degussa Aktiengesellschaft and Degussa Corp., Decision And Order, supra note 386 at III.
In the matter o f The Upjohn Co. and Pharmacia Aktiebolag, FTC File No. 951-0140, Complaint o f Feb. 8th, 1996,
121 F.T.C. 44 [hereinafter in the matter o f The Upjohn Co. and Pharmacia Aktiebolag, Complaint].
In the matter o f The Upjohn Co. and Pharmacia Aktiebolag, FTC File No. 951-0140, Agreement Containing Con
sent Order And Analysis To .Aid Public Comment o f Nov. 7th, 1995, 60 F.R. 56153 at 56158 [hereinafter in
the matter o f The Upjohn Co. and Pharmacia Aktiebolag, Agreement].
In the matter o f The Upjohn Co. and Pharmacia Aktiebolag, Complaint, supra note 389 at paras. 5, 6.
57
well to currently available chemotherapy agents.392 Although none o f the parties had achieved an
approval from the Food And Drug Ad m in istration (FDA) the Commission expected sales o f
the relevant product to cross the line of U.S. S 100 million by 2002, and the availability o f the
treatment was estimated to raise the survival rate o f cancer patients substantially.393 By the time
the merger was proposed, Upjohn had the rights for CPT-11, a topoisomerase I inhibitor devel
oped in Japan by Yakult Honsha and Daiichi, whereas Pharmacia possessed the world-wide
rights for its product 9-AC under a Cooperative Research and Development Agreement with
the U.S. National Cancer Institute.394 The FTC referred to the U.S. as the geographic market395
The market was - so the Commission contended - highly concentrated, with Upjohns product
expected to be no. 1 in terms o f future sales. The barriers to entry were deemed to be insur
mountably high within a period o f two years, due to the intensive research activity and the re
quired approval by the FDA.396
The anticompetitive effects o f the merger were found to be threefold. The Commissions
staff alleged that the transaction would (1) eliminate any actual, potential, and substantial com
petition between the parties in the area o f research, (2) reduce the number o f research tracks,
and (3) eliminate the potential for a later price competition on the market for the pertinent can
cer treatment.39
As a remedy for the competitive harm, the Agency suggested a divestiture o f Pharmacias
9-AC assets. The term was meant to comprise all intangible assets related to the research and
development of 9-AC for sale in the relevant geographic market such as formulations, patents,
trade secrets, technology', and know-how. It also includes all rights o f Pharmacia to National
Cancer Institute intellectual property vested in Pharmacia on the grounds o f the aforementioned
agreement.398The expressed objective of the FTCs actions was to m aintain the existence of two
independent pharmaceutical companies to continue research and development o f the cancer
treatment at issue. For this reason, Upjohn and Pharmacia were also obliged to assist any ac
quirer of the assets to divest in any manner that might prove necessary' for the acquirer to com
393 In the matter o f The Upjohn Co. and Pharmacia Aktiebolag, Agreement, supra note 390 at 55158.
393 In the matter o f The Upjohn Co. and Pharmacia Aktiebolag, Complaint, sicpra note 389 at paras. 5, 6.
394 In the matter o f The Upjohn Co. and Pharmacia Aktiebolag, Agreement, supra note 390 at 55159.
395 In the matter o f The Upjohn Co. and Pharmacia Aktiebolag, Complaint, supra note 389 at para. 7.
396
ibid at paras. 8, 9.
39" ibid at para. 10 (a)-(c).
398 In the matter o f The Upjohn Co. and Pharmacia Aktiebolag, .Agreement, supra note 390 at 55155.
58
mence and continue successful research activities.399 Eventually, IDEC Pharmaceutical Com
pany was chosen as the second participant in the competition for the most innovated topoisomerase I inhibitors.
b)
SNIA S.p A . An d Gambro

On November 3rd, 1998, the Italian firm SNIA S.p.A. (SNIA) and the Swedish company
Gambro entered an Asset and Stock Purchase Agreement that allowed SNIA to acquire 100%
o f the outstanding voting securities o f COBE Cardiovascular, Inc. (COBE) and some cardio
pulmonary and other cardiovascular assets from COBE Laboratories, Inc. (COBE) both firms
being wholly owned subsidiaries o f Gambro for the price o f U.S. S 260 million. SNIA, which
was acting through its subsidiary, Sorin Biomed S.p.A., is an enterprise pursuing the research,
development, manufacture, and sale o f heart-lung machines, as is Gambro and its several sub
sidiaries.'100 Consequently, the Commission delineated the relevant product market as the re
search, development, manufacture, and sale o f heart-lung machines. The geographic dimension
o f the market was stated to be the U.S.401
In this market the FTC detected a high market concentration leading to a post-merger HHI
o f 4638 after an increase of 1554. Gambro and SNIA were designated to be the largest and
third-largest supplier o f the respective product in the U.S. The possibility o f any offsetting entry
was repudiated because o f necessary FDA authori2ations whose obtainment usually takes a pe
riod of several years.402 The effects on competition anticipated by the FTC were the elimination
o f actual and potential competition between SNIA and Gambro, as well as an increased likeli
hood o f uni- and collateral behaviour that would eventually result in higher prices for heart-lung
machinery. Furthermore, the transaction would allegedly lead to a reduction of innovation ac
tivity.
403
The solution preferred by the Agency was the divestiture of all COBE assets to the U.S.
Baxter Healthcare Corp. or another acquirer. The acquirer was to grant SNIA licences for any
intellectual property relating to machines that were currently developed, whether or not they
399 ibid. at 55159.

400 In the matter of SN IA S .p A ., FTC File No. 991-0095, Complaint o f July 28th, 1999 at paras. 1-10 [hereinafter
in the matter of SN IA S .p A . Complaint].
401 ibid. at paras. 8, 9.
402 ibid at paras. 10-12
59
would eventually be sold. The FTCs proposal also provided for an indemnification o f the ac
quirer by SNIA, for all damages resulting from the failure o f COBE machines supplied by
SNIA as well as for assistance within commercial reasonability. In the case o f market failure of
the acquiring firm, the agreement contains a clause providing for the relapse of the divested
assets to SNIA.404
c) C iba -G eig y l t d . A n d Sa n d o z Lt d .
In December 1996, the FTC tried to settle charges that the S63 billion merger o f Swiss
pharmaceutical companies Gba-Geigv Ltd. and Sandoz Ltd., each o f which had L.S. subsidiar
ies, would violate the antitrust laws. On March 6th, 1996, the parties entered an agreement to
merge into a new entity to be named Novartis AG which would be a firm under Swiss law and
control wodd-wide assets o f U.S. S 80 billion.405
Ciba-Geigy Ltd., doing business in the U.S. through Ciba-Geigy Corp., was engaged in the
discover}, development, manufacture, and sale o f agricultural crop protection chemicals, pro
prietary and generic pharmaceutical products, and animal health products. Through Chiron
Corp. (Chiron), of whose stock it owned 46.5 o, it also participated in the discover}, develop
ment, manufacture, and sale o f gene therapy products. Chirons research activities were funded
by Gba-Geigy Ltd. which in return had the right to appoint members of the Board o f Direc
tors.406 Sandoz Ltd. whose commercial interests in the U.S. were looked after by its subsidiary
Sandoz Corp., was likewise doing business in similar sectors and through further subsidiaries
Sandoz Pharmaceuticals Corp. and Genetic Therapy, Inc. engaged in genetic therapy.40
Due to the broad scope o f activities of the parties, the C o m m ission spotted a variety of
relevant product markets on which the merger would probably generate anticompetitive effects.
The first line o f commerce identified was the gene therapy technolog} and the research and
development o f gene therapies. Specifically, the Agency mentioned the herpes simplex virusthymidine kinase (HSV-tk) gene therapy for the treatment o f cancer, the HSV-tk gene therapy
for the treatment of graft versus host disease, the gene therapy for the treatment of hemophilia,
403
404
405
406
40"
ibid. at para. 11 (a)-(d).

In the matter o f S N IA S .p A -. FTC File No.991-0095, Decision And Order o f July 28th, 1999 at II.
In the matter o f Ciba-Geigy Lid. et aL. Complaint, supra note 98 at 3.
ibid at 1
ibid
60
and the chemoresistance gene therapy.408 Gene therapy refers to therapeutic intervention in
humans based on the modification of the genetic material o f living cells. In 1996 there wasnt
any FDA approval for such a therapy but the FTC presumed the existence o f efficient gene
therapies in the fields of oncology, reducing risks o f bone marrow transplantation, hemophilia,
and to the benefit o f cancer patients in reducing chemoresitance likely for the year 2000. Sales
o f gene therapy products were anticipated to accrue to U.S. S 600 million by 2002 and U.S. S 45
billion by 2010.409 The second relevant market identified was the research, development, pro
duction, and sale o f com herbicide. The Commission alluded that this market included a variety
o f submarkets with regard to the types o f weeds needing control, and the stages o f growth of
the crop or weed.410 A third relevant market was found in the research, development, manufac
ture, and sale o f flea control products.411 All markets allegedly showed only a very slight chance
o f market entry due to the heavy regulations in the U.S. and the time-consuming process o f
research and obtaining permission by the competent U.S. authorities.41*
Without going into detail, the Commission contended that the gene therapy market showed
a high degree o f concentration. It attributed this concentration level to the fact that market par
ticipation required a high research capacity that was only possessed by a small number o f firms,
especially concerning mass production. The parties were designated as being the leading devel
opers o f gene therapy products and as being most advanced in clinical development. Further
more, much o f the intellectual property' needed for successful research is owned by the few in
cumbents including Ciba-Geigy Ltd. and Sandoz Ltd.413 The same diagnosis was made with re
gard to com herbicide and the submarkets. For the comprehensive herbicide market the Agency
discovered a market share of Ciba-Geigy Corp. of 35% o f Dollar sales and 40% o f treated acres,
and a market share of Sandoz Corp. o f 10% by either measure. The post-merger HHI would
allegedly increase by 700 for Dollar sales and by 1000 for treated acres, resulting in a count of
3000 and 3300 respectively. The FTC expressly mentioned two further factors that intensified
the market density. First, there was strong recognition o f the brands produced by the parties
which had recently enjoyed a substantial growth of their sales on all submarkets. Second, at the
same time the parties supplied many other manufacturers o f com herbicides with the ingredi
ibid
ibid, at 4.
ibid
ibid
ibid at 5. The different requirements for market entry are explained in great detail at 8. For the purposes of
clarity a further description is foregone here.
61
ents needed for production.414 Also, the market for flea control products was deemed to be
highly concentrated Gba-Geigy Corp. being the market leader with a market share o f 50 o and
an expected increase o f the HHI o f 3050 to 6600 as a result o f the merger.415
The FTC contended that the merger, as initially proposed, would eliminate any competition
between the parties including the reduction in, delay of, or redirection of research and develop
ment projects. The corollary o f heightened barriers to entry would further reduce actual or per
ceived potential competition.416 Apart from the usual concerns o f the exercise o f market power
and subsequent price increases, in the market for gene therapy products the FTC was particu
larly worried about a potential reduction o f innovation activity expressed in a decreased number
of research tracks and less incentive to collaborate with other researching firms. This would,
from the Agencys perspective, eventually lead to a slowed-down invention process o f efficient
gene therapy products.41
As a solution, the Commission suggested the divestiture o f the entire com herbicide busi
ness o f Sandoz Corp. to the German BASF AG pursuant to an agreement already made in
September 1996.41* Additionally, the parties were to divest the A n im al Health Business o f San
doz Corp., consisting of the facilities to produce flea protection products in Dallas, Texas, to
Central Garden And Pet Co. Expressly excluded from this divestiture obligation was the pro
duction site in Muttons, Switzerland, as well as flea protection products sold outside the U.S.
and Canada and all that had been owned by Ciba-Geigy prior to the merger.419 The innovation
issues should be fixed by granting HSV-tk licences to Rhone-Poulenc Rorer S. A. on a non
exclusive basis, and other licences to any requesting part}- including the assistance necessary'.420
Novartis AG consented to refrain from acquiring any interest in the businesses divested, or
from increasing the interest in the Chiron Corp. by more than 1% for a certain period. Objec-
413
414
415
416
4 P
418
419
420
ibid
ibid. at 6, 7.
ibid. at 7.
ibid at 9. The theory o f actual potential competition assumes that a deterring effect on firms able and prepared
to enter the market harms competition, whereas the notion o f perceived potential competition refers to po
tential competition that is not necessarily existent, but is felt by the incumbent firms, see Michael P. OBrien,
Foreign Competition in Relevant Geographic Markets: .Antitrust Law in World Markets (1985) 7 J. IntT. L.
Bus. 37 at 40.
In the matter o f Gba-Geigy L id et aL, Complaint, supra note 98 at 9.
In the matter o f Gba-Gagy L td , Gba-Geigy Corp., Chiron Corp., Sando L id , Sando~ Corp., and Novartis A G , FTC
File No. 961-055, Decision And Order o f March 24th, 1997 at 13 [hereinafter in the matter o f Gba-Geigy L td et
aL, Decision .And Order].
ibid
ibid at 19, 20.
62
rions that were made against the licensing requirement, and requests to implement a divestiture
o f the HSV-tk research facilities instead, were rejected by the majority o f the Commission,
pointing to the fact that an interruption in the ongoing research o f the parties should be
avoided. The Novartis AG was deemed to be the only firm possessing the equipment and the
intellectual property to properly continue the research, so that a divestiture would merely slow
down the innovation process.421 Likewise, the argument that licensing would only create a
clone o f the parties research track was discarded, even if the argumentation was somewhat
flimsy.422 The Commission eventually denied the rooting o f its proposed solution in the essen
tial facilities doctrine423 and justified the concept o f royalties.424
421 In the matter o f Gba-Gagy Lid., Gba-Gagy Corp., Chiron Corp., Sando~ L id , Sando Corp., and Novartis A G , FTC
File No. 961-055, Separate Statement o f Chairman Robert Pitofsky, and Commissioners Janet D. Steiger,
Roscoe B. Starek III., and Christine Varney at 1 [hereinafter in the matter o f Gba-Geigy L id et aL, Separate
Statement].
422 ibid at 3.
423 The essential facilities doctrine deals with refusal o f monopolists to deal. The Seventh Circuit summarized the
elements o f the essential facilities doctrine in M G Communications Corp. v. American Telephone and Ttlegraph Co.,
708 F.2d 1081, 1132 (7th Cir.): AT&T had refused to allow MCI to connect to AT&Ts nationwide network
o f phone lines. MCI alleged that the AT&T phone network was essential for MCI to compete in the provision
o f long distance phone services. The court found that the facilities were indeed essential, and that AT&Ts re
fusal to deal was an act of monopolization: Such a refusal may be unlawful because a monopolists control o f
an essential facility (sometimes called a bottleneck) can extend monopoly power from one stage o f produc
tion to another, and from one market into another. Thus, the antitrust laws have imposed on firms controlling
an essential facility the obligation to make the facility available on nondiscriminatory terms. The court listed
four elements necessary for finding that a facility is essential: (1) control o f an essential facility by a monopo
list; (2) a competitors inability practically or reasonably to duplicate the essential facility; (3) die denial o f the
use o f the facility to a competitor, and (4) the feasibility o f providing the facility.
424 In the matter o f Gba-Geigy L id et a t, Separate Statement, supra note 421 at 4, 5.
63
C h a p te r 4 - A n a ly s is O f I n s tr u m e n ta u z a t i o n
A.
a n a l y s is
O f P e r c e p t ib l e
I.
D o m e s t ic M e r g e r s O n D o m e s t ic M a rk ets
1.
M a r k et D e f in it io n
in s t r u m e n t a l iz a t io n
It is noticeable that the review of domestic mergers strictly follows the principles outlined in
the 1992 Merger Guidelines and the underlying economic ideas. This is especially true for the
market definition. In the Staples/Office Depot case, the FTC was criticized for having es
chewed the analytical framework set out in the Merger Guidelines for the Brown Shoe ap
proach.425 The Agencvr, however, only relied so heavily on the pricing practices o f the parties
because it used the price differences between local markets with one, two, or three competing
office supply superstores to support its allegation that despite the price raising that had oc
curred, customers had not switched to other sources o f supply. This was perfectly in accordance
with the Agencies usual method of delineating the relevant product market. The same rigid
approach to the definition o f product and geographic market is visible in the other discussed
cases. It is striking that, although the domestic market for a given product may comprise the
whole o f the U.S., in the relevant geographic markets there is a concentration on certain locali
ties, or regions, or a network o f smaller markets.426 This is apparendy rooted in the fact that
international competition is less perceptible on markets o f low-tech, tangible products like office
supplies, or movie theaters, or those that require a significant infrastructure or a network of
facilities.42
2.
A s s e s s m e n t O f A n t ic o m p e t it iv e E f f e c t s
With regard to the anticompetitive effects, a similar vigor is manifest. It is of importance

that in recent litigations the Agencies, and subsequendy the courts, not only viewed an expect
425
426
4r
Karen Donovan, Back to Brown Shoe? Superstores are Major FTC Target, New .Anti-Trust Theory Says
Require a Distinct Submarket N a tl L.J. (April 21", 1997) A1 at A l. The standard o f reasonable interchangeabiltty set out in Brawn Shoe v. United States, supra note 218, is much more discretionary than the
SSNIP-test o f the 1992 Merger Guidelines. Yet the similarity o f the factors taken into account shows that the
approach o f the Agencies is not free from arbitrary factors.
see e. g. United States v. A T c~ T Corp. and Tele-Communications, Inc., Competitive Impact Statement, supra note
252 tn. 6; United States, State of New York, State of Illinois v. Sony Corp. of America et aL, Complaint, supra note 233
at 13.
see e. g. in the matter o f Jitney-Jungle Stores of America, Inc., FTC File No. 971-0093, Analysis To Aid Public
Comment o f Sep. 23rd, 1997, 62 F.R. 49687 [hereinafter in the matter of Jitney-Jungle Stores of America, Inc.,
.Analysis]: supermarkets; in the matter o f General Mills, Inc., FTC File No. 961-0101, -Analysis To Aid Public
Comment ot Jan. 15th, 1997, 62 F.R. 2162: cereals: United States v. U SA Waste Services, Inc., No. 97-1524, Pro
posed Final Jugdement And Competitive Impact Statement, 62 F.R. 47680 (VC7. D . Pa. Sep. 10th, 1997): waste
64
able price increase, but also a belated or slowed down rate o f price decreases as harmful to con
sumers and therefore to competition.42* The analyses seem to suggest that despite the principal
dichothomv o f uni- and collateral anticompetitive behaviour, the Agencies have shifted the fo
cus from collateral behaviour, on which they concentrated in the 1980s429, to the danger o f uni
laterally induced increases.430 Indeed, the review of domestic mergers displays a significant turn
o f attention to the enforcement against probable unilateral behaviour. However, it is not entirely
lucid whether this result stems from an intended restraint in enforcement activity.431 To success
fully implement a unilateral price increase, a large market share, typically larger than 35%, is re
quired.432 As we have seen, many o f the domestic mergers do actually generate concentration
levels high enough to raise concerns with respect to unilateral anticompetitive measures. Does
this entail the conclusion that the red-alert-light in U.S. merger enforcement goes on retardedlv; that a properly acting antitrust authority' should have intervened at an earlier stage?433 The
concentration level is inextricably linked to the definition o f the relevant market. A narrow defi
nition obviously leads to a higher market concentration.434 M & As with an impact chiefly on
domestic markets show a characteristic relevance of local or regional, i. e. geographically very
limited, markets. Thus, the concentration and the subsequent concerns o f primarily unilateral
behaviour are not the result o f an inappropriate reluctance, but o f a realistic recognition o f eco
nomic facts. Whether the concentration levels prior to the transactions in question are the result
o f M & As or o f market exits and internal growth is not entirely traceable, but there are no signs
o f laxitv o f enforcement in that matter either.433
disposal semces.The situation on the likewise examined airline market is a special one since, with exception of
the EL', domestic flights everywhere in the world are only offered by domestic carriers.
FTC v. Cardinal Health, Inc., Bergen Brunswick, Corp. v. McKesson Corp., AmeriSource Health Corp., supra note 206 at
39-43.
Yvonne S. Quinn, Merger Analysis (1999) 1116 PLI/Corp. 615 at 647.
430 The Harvard Law Review Association, supra note 77 at 2428.
431 ibid.
43;: Gregory J. Werden, Product Differentiation: Practicing \X7iat The) Preach: One Lawyers View Of
Econometric Models In Differentiated Product Markets (1997) 5 Geo. Mason L. Rev. 393 at 397. Note that
this margin has to be handled extremely cautious, it is very depending on the tacts o f the particular case, The
Harvard Law Review Association, supra note 77 at 2431-32, 2437.
433 Federal Antitrust Policy, supra note 58 at 445: The problematic level o f concentration for collateral anticompeti
tive behaviour is significantly lower than the one required for the undue exercise o f market power by a single
firm.
434 Herbert Baum, Der relevante Markt als Problem der Vfettbewerbspolitik [1988] WuW 401 at 401.
435 Moreover, the contention that the Agencies entirely disregard the danger of co-ordinated pncing behaviour is
not true. The proposed joint venture between the Shell Oil Co. and Texaco, Inc. that would have lead to the
largest oil company in the U.S. primarily raised concerns with regard to co-ordinated action in the gasoline re
fining sector, although the concentration there does not reach a degree as alarming as in many other lines of
commerce, in the matter o f Shell O il Co.and Texaco, Inc., FTC File No. 971-0026, Final Consent o f April 22nd,
1998.
65
Even though the 1992 Merger Guidelines claim that market structure and concentration
expressed by the HHI only provide the first indication for the likeliness o f anticompetitive con
duct436, they seem in most domestic merger cases to decisively point the way for further exami
nation. The presumption o f anticompetitive harm created by high HHIs is rarely rebutted by
other factors.43 However, even though the relevance o f non-structural factors in the field o f
antitrust enforcement against domestic mergers has not gone far beyond a programmatic sig
nificance438, the reliance on market concentration leads to a lower threshold o f enjoinment
rather than to laxity. In this respect, an instrumentalization o f merger control is on a domestic
level not apparent
3.
E n t r y A n a l y sis
The same result applies to the Agencies analysis o f the ease o f entry. Having come to the
conclusion that anticompetitive conduct is probable in a post-merger environment, the analysis
o f possible market entry is usually terminated rather quickly. Three factors are predominantly
invoked: (1) it is often alleged that market entry requires the investment o f significant sunk
costs, whose recoupment is doubtful, (2) the time necessary to enter the market is too long to
significandv deter the incumbents from raising prices or reducing quality because it requires, for
instance, substantial facilities or the setting up o f a distribution system, (3) the infrastructure
consisting of tangible as well as intangible assets, e. g. slots for airline carriers, is difficult or even
impossible to obtain for new market entrants. More rarely, the antitrust authorities also refer to
irrational factors such as brand recognition to support their argument that customers would
prefer the incumbent firms instead o f switching to a new supplier.439 In this context, the Agen
cies have given noticeably more attention to network-creating mergers than they did a decade
ago. On the basis o f a more sophisticated understanding o f network effects, including network
externalities, installed base, and switching cost and the first instances o f a serious threat of fore
closure occurring, this increased scrutiny is certainly justified.440 Given the relatively high stan
*56
J9 9 2 Merger Guidelines, supra note 10 sec. 2.0: [MJarket share and concentration data provide only the
starting point for analyzing the competitive impact o f a merger.
43' FTC v. Staples, Inc. and Office Depot, Inc., 101 at 1081; United States v. A T <L~ T Corp. and Tele-Communications, Inc.,
Competitive Impact Statement, supra note 252 fn. 6; in the matter o f Jitney-Jungle Stores o f America, Inc.,Analysis,
supra note 427 at 49687; FTC v. Butterwortbs Health Corp. c~ Blodgett Memorial Medical Center, 946 F. Supp. 1285
(W. D. Mich. 1996), afFd., 121 F.3d 708 (6<h Cir. 1997).
438 David Snyder, Mergers And Acquisitions In The European Community And The United States: A Move
Toward A Uniform Enforcement Body? (1997) 29 L. & Pol. InFI. Bus. 115 at 128.
439 United States v. A T c~ T Corp. and Tele-Communications, Inc., Complaint, supra note 251 at 6.
440 R. G. Parker & D . A. Balto, supra note 173 at 388
66
dards o f timely, likely, and sufficient entry, an effective use o f entry to play down the anticom
petitive consequences o f M & As is not detectable.
4.
E f f ic ie n c i e s
As far as the issue o f efficiencies is concerned, FTC and DOJ are remarkably averse to con
ceding claims made by the parties. In Staples/Office Depot, the Agencies and subsequendy
the court rejected the alleged efficiencies on the grounds that they seemed grossly exaggerated.
Furthermore, the underlying unwillingness to accept a substantial efficiency gain as declared by
the parties seems to stem from in the opinion that improved purchasing power, increased ad
vertising discounts, or better geographic coverage may be achieved fairly prompdv through in
ternal expansion, particularly if the parties do business on rapidly expanding markets.'141 The
Agencies frequendv adhere to the concept o f cognizable efficiencies introduced into the Merger
Guidelines by the 1997 revision. They also carefully examine whether the contended efficiency
gains would more probably be passed on to consumers rather than being used to expand the
parties profit margin. An important line o f commerce that recendy saw a lot o f M & Aacdvity is the high-cost sector o f health care. All proposals o f hospital mergers rely to a signifi
cant degree on the allegation o f efficiency gains.442 In order to determine their justification, FTC
and DOJ scrutinized thoroughly to see whether any consumer benefit could result from the
combined activities of health care operators.443 Even though it is not true that the revision of the
Guidelines has raised the bar, as have several authors stated444, it cannot be said that the en
forcement of Section 7 Clayton Act against domestic mergers shows any weakness by accepting
unsubstantive or inflated efficiency claims in order to pursue non-competition goals.
5.
C r it iq u e
The review of mergers o f firms operating solely in the U.S. is, however, not without flaws.
The examples discussed above reveal inconsistencies. For instance, the fact that the movie exhi
bition chains could successfully raise the prices for tickets in Manhattan to a nation-wide record
level only a couple o f months after the consummation o f the transaction, arouses the suspicion
441
44-
Efficiencies, supra note 102 at 488.

see also U.S. Department o f Justice & Federal Trade Commission, Statements of Enforcement Policy and Analytical
Principles Relating to Health Care A n d Antitrust, 4 Trade Reg. Rep. (CCH) 13152 at 20774 (1994).
443 see e. g. FTC v. Tenet Healthcare Corp., 17 F. Supp. 2d 937, 948 (E. D . Mo. 1998); United States v. Long IslandJeuish
Medical Center, 983 F. Supp. 121 (E. D. N*. Y. 1997).
444 VC. J. Baer & D. A. Balto, supra note 173 at 246 ff.
67
that either the divestiture ordered by the DOJ was not suffidendy far-reaching or that the
merger review was in fact so rigid that the parties could not sensibly obtain the effidendes
aimed at.445 Astonishing as well is the fact that in the AT & T /TC I, case the DOJ entirely disre
garded the vertical dimension o f the merger. TCI is the second cable operating company in the
U.S. with a network o f affiliated cable TV systems that reaches approximately 35 o o f all U.S.
homes. If AT & T, now controlling TCIs high-speed cable lines, successfully prevents other
companies from using these facilities it can severely impede competition with regard to the te
lephony and internet markets. Ultimately, though, these inconsistendes are mere mistakes rather
than the reflecdon o f a pattern o f neglecting competition. Consequendy, with regard to M & As
that only affect the U.S. market, it must be stated that the effects o f transnadonalizadon have
not led to any instrumentalization.
II. U .S. F ir m s O n M a r k e t s U n d e r I n t e r n a t io n a l C o m p e t i t i o n
1.
A n a l y s is I n G e n e r a l
Merger review in the U.S. is often subject to criddsm that it does not suffidendy serve as an
instrument to promote the intemadonal competitiveness o f the U.S. economy.446 It might be for
that reason that cases referring to markets where U.S. firms have to cope with competition by
Non-U.S. firms show a slighdy different picture than the ones analyzed hitherto.
a)
M a r k e t D e l in e a t io n
An analysis o f the practice o f merger review should begin by mentioning that markets o f an
international scale often reveal manifold peculiarities that render generalizations problematic.
Some o f these markets have recendy undergone a process o f radical consolidation - such as the
oil industry44, whereas others like computer-hard- and software or media-related markets
are rapidly expanding. Other dedsions, focusing on innovation, refer to markets that do not
even exist yet. Moreover, individual markets are to varying degrees o f obviousness subject to
political considerations apart from the ones related to international competitiveness. These con
siderations become most apparent with regard to the defense industry where interests o f na
tional security are always a factor taken into account44* Less distinct, are questions of national
445
4,16
44~
448
The parties justified the price increase by the expansion o f operational costs.
B. D. Garland & R. R. Levary, supra note 198 at 53-34.
In the matter o f Exxon Corp. and M obil Corp., Analysis, supra note 264 at 2618-19.
K. Luz, supra note 298 at 153.
68
prestige which, for instance, unquestionably swayed the Agencies Boeing/McDonnell-Douglas

decision aside from the goal o f maintaining competition.449 That complex background o f influ
ential factors compounds the task o f detecting the reasons for the emergence o f transnational
ized market structures and the problems triggered by this development.
Given an increasingly internationalized environment for U.S. firms, a first expectancy would
be that the Agencies, when delineating the geographic dimension o f the relevant market, would
refer to a greater extent to markets which exceed the U.S.450 In fact, the assumption o f broad
markets would form a perfectly suited means to artificially reduce the concentration level in
order to support an approval o f proposed mergers. Yet, such a procedure is not perceptible
even in the most recent merger review cases. In its decisions concerning vertical M & As in the
entertainment industry that undeniably brought forth impacts on competition well beyond the
North-American continent, the Agencies confined the geographic market to the U.S.451 They did
likewise when assessing the competitive effects o f the acquisition o f Intuit by Microsoft, al
though it would have appeared to presume the existence of a wider market The strong position
o f the parties had led to the effect that not only in the U.S., but abroad too, there was no sub
stitution available to which customers could have switched as a response to a price increase. The
Antitrust Division o f the DOJ strictly employed the test set out in Sec. 1.21 o f the 1992 Merger
Guidelines and concluded that any geographic customer migration crossing the U.S. borders
would not occur. Albeit the possibility o f world-wide relevant markets already being recognized
by the 1984 Merger Guidelines452, the psychological barrier453 to extending the relevant be
yond the protected454 market seems to have subsisted.
449 ibid. at 155.

45c' see M. P. O Bnen, supra note 416 at 39.
451 In the matter o f Time Warner, Inc., Turner Broadcasting Systems, Inc., Tele-Communications, Inc., and Liberty Media
Corp., FTC File 961-0004, Complaint o f Feb. 3*, 1997 [hereinafter in the matter o f Time Warner, Inc. et aL,
Complaint]; United States v. Primestar, Inc.; Tele-Communications, Inc.; TCI Satellite Entertainment, Inc.; Time Warner
Entertainment Co. L. P.; MediaOne Group; Comcast Corp.; Cox Communications, Inc.; GE American Communications,
Inc.; .Yewhouse Broadcasting, Corp.; The S en s Corp. L td ; M CI Communications Corp.; Keith Rupert Murdoch, Civil
No.:l:98CV01193 (JLG), Complaint o f May 12th, 1998.

452 1984 Merger Guidelines, supra note 13 sec. 2.31.
453 David A.Clanton, Recent Merger Developments: Coming O f Age Under The Merger Guidelines (1984) 53
Antitrust L. J. 345 at 345.
454 Section 7 Clayton Act refers explicitly to a section o f the country. Consequently, the mandate conferred to
DOJ and FTC, viz., to protea competition ends at the borders of the U.S. and so does the proteaed mar
ket.
69
The definitions o f the relevant product markets reveal the same efforts to achieve a precise
result.455 However, there are some traces o f doubt. The denial o f any overlaps between the
military and the civil division of the combined Boeing/McDonnell-Douglas entity, for instance,
is not based on facts as obvious as the FTC contended. Even taking into account the political
dimension that influenced the decisions on either side o f the Atlantic, the European Commis
sion quite convincingly deduced that unhindered access o f Boeing to the technological data of
McDonnell-Douglas military branch, which - as opposed to the manufacturing o f civil aircraft
- was performing well, would raise competition-related concerns.456 Moreover, the Commission
addressed an issue omitted by the FTC: that the McDonnell-Douglas m ilitary division benefited
from generous public funding from which the Commission expected to profit the civil aircraft
manufacturing of the combined entity.45
b)
M arket C o n c e n t r a t io n
As far as the vital aspect of market concentration is concerned, the class o f merger deci
sions dealing with U.S. firms under international competition reveals a remarkable upward de
parture from the domestic cases. The average post-merger HHI o f all cases examined here458
sums up to 4800 points, i. e. far beyond the threshold o f 1800 that usually marks the state of
high concentration.459 An answer to the question o f whether this is the result of a calculatedly
retarded intervention requires a glance at the pre-merger development o f the market structure.
On the grounds of the market peculiarities mentioned above, the picture that unfolds here is
heterogeneous. On the oil market, for instance, prior to the Exxon/Mobil merger an increase in
concentration by means o f external growth was observed. Despite the Agencies contention that
the concentration has not reached an alarming level, the idea that earlier resistance by FTC and
DOJ could well have been justified cannot be easily dismissed. The U.S. oil markets concentra
tion level displayed an HHI surpassing the threshold o f 1800 at the time when the
Exxon/Mobil proposal was examined. This contrasts sharply with the steps taken by the Agen
cies when assessing the competitive effects of the BP/Amoco merger. While a market share of
455
see e. g. in die matter o f Ebecon Corp. and M obil Corp.. Complaint, supra note 252 at para. 8; in the matter of Digital
Equipment Corp.. FTC File N o. 981-0040, Complaint o f April 23rd, 1998, at paras. 11-14 [hereinafter in the
matter o f Digital Equipment Corp., Complaint].
456 EC, Commission Decision ofjuly 30th, 1997, [1997] O. J. L 336/16 "Boeing/McDonnell-Douglas.
45" ibid
4M see below Appendix, Table 2 at XXXII.
459
Malcolm B. Coate, Merger Enforcement at the Reagan/Bush FTC in Malcolm B. Coate/Andrew N. Kleit,
eds.. The Economics O f The Antitrust Process (Boston: Xluwer Academics, 1996) 135 at 140 finds that the average
70
84 o o f the market o f gasoline retail in the territory of Guam (!) resulted in the divestiture o f 34
gas stations, BP/ Amoco were forced to cancel supply contracts with about 1600 gas stations in
metropolitan areas that showed maximum post-merger HHIs o f 3500. Apart from the remedies
imposed on Exxon and Mobil with regards to the market o f jet turbine oil where the existence
of a world-wide post-merger monopoly demanded the divestiture o f the Exxons entire business
as the only appropriate remedy, the assessment of the competitive effects o f the Exxon/Mobil
merger seems to have occurred very cautiously. Absent the willingness to fiercely attack this
transaction, that would have justified a considerably stricter approach, the FTC and DOJ con
centrated on remote issues and refrained from insisting more than alibi remedies on the parties.
Compared with this, the relevant market in the Microsoft/Intuit case showed much more of
internal expansion due to the fact that no competitor was capable of offering a product o f com
parable quality. Taking this into account, it cannot be deduced from the not entirely transparent
concentration rates in the examined cases that there exists an underlying pattern o f deliberately
favoring U.S. industry7. And yet the concentration levels in various international markets are
striking and do not fit into the asserted policy o f FTC and DOJ.460
c) E n try Analysis
The disciplining function o f market entry was most apdy expressed by the District Court of
the Northern District o f California in United States v. Sjufy Enterprises461: The absence o f barri
ers is the first industry7 characteristic that may rebut a presumption o f anticompetitive effects.
Where entry is easy, it is uncommon for post-merger firms to abuse market power, either collusively or unilaterally. In view o f this, the reasoning o f FTC and DOJ regarding market entry
often is rather feeble. Mostly the Agencies are satisfied with merely stating that market entry7is
not to be expected in a timely, likely7, and sufficient manner.'462 Dealing with innovation issues,
the FTC and DOJ correcdy point to the fact that other firms lack the research potential for a
market entry7 satisfying the exigencies of sec. 3 of the 1992 Merger Guidelines.463 Likewise the
Agencies seem to be increasingly vigilant in investigating M & As that create entrant-excluding
461
462
threshold for an investigation (not challenge) at the FTC between 1983-1992 was 2400 after an increase o f 500
points.
Charles E. Mueller, Bill Gates And Antitrust Negligence In America: A Failure O f Public Policy" (1997) 28
Antitrust L. & Econ. Rev. 91 at 94: Claims that [a] competent and honest Justice Department/FTC would
have long ago cut his (Bill Gates) market share o f 80% share o f the operating system to 10% or so.
712 F. Supp. 1386, 1395-96 (N. D. Cal. 1989).
see e. g. in the matter o f Precision Castparts Corp. and Wjman-Gordon Co., Decision and Order, supra note 283 at
para. 18.
United States v. Microsoft Corp. and Intuit, Inc., Complaint, supra note 92 at paras. 20, 21.
71
effects by the creation of networks, having realized that network effects generate significant
barriers to entry.464 Anyway, the current practice does not comply with the demands of detailed
explanation imposed on the Agencies by the courts.465 Any superficiality, however, does not take
the effect o f an instrumentalization. On the contrary, the rash affirmation o f the non-existence
o f significant market entry rather impedes merger activity than fostering it inappropriately.
d)
A s s e s s m e n t O f A n t i c o m p e t it iv e E f f e c t s
In the same way the allegations o f the mergers anticompetitive effects often lack the sup
port of an in-depth argumentation. The statement that the proposed transaction will eliminate
competition between the parties and therefore lead to an augmented probability o f increased
prices and reduced output and quality frequendy is the only reasoning available. Arguably, in
view o f the market concentration, this succinct argument cannot be said to be incorrect, as with
post-merger market shares of up to 90 o the probability o f unilateral impositions of market
conditions by the combined entity is hard to refute. There are, however, two exceptions:
(1) I n n o v a t io n M a r k e ts
When negative effects on innovation build the basis for the enjoinment o f a merger the
Agencies strive to develop a consistent argumentation.466 The verve revealed by FTC and DOJ
in enforcing Section 7 Clayton Act against presumed innovation-restraining transactions is ex
pressly based on the assumption that a strong innovation potential is vital to the competitive
ness o f U.S. industry.46 Hence, merger review here displays distinct signs o f instrumentalization
in order to meet the challenges o f transnationalized market structures. What strikes the observer
with surprise, though, is the fact that this instrumentalization manifests not in laxity as expected
but in a higher degree o f strictness. The Agencies have intensified their focus on innovation
markets in recent years - a development that has not provoked only appreciation.464 Albeit
R. G. Parker & D. A. Balto, supra note 173 at 388. FTC and DOJ also expressly recognize apparent barriers as
the requirement o f approval by the FDA when examining transactions in the pharmaceutical industry, David
A. Balto & James Mongoven, Antitrust Enforcement in Pharmaceutical Industry Mergers (1999) 54 Food &
Drug L. J. 255 at 260.
Malcolm B. Coate & Andrew N\ KJeit, The Economics O f The Antitrust Process in Malcolm B. Coate &
Andrew N. Kleit, eds., The Economics O f The Antitrust Process (Boston: Kluwer Academics, 1996) 1 at 6.
see e. g. in the matter o f Digital Equipment Corp., Complaint, supra note 455 at paras. 15-23; United States v. Micro
soft Corp. and Intuit, Inc., Complaint, supra note 92 at 13 and para. 4.
Vi'. J. Baer & D. .A. Balto, supra note 173 at 221; D. A. Balto & J. Mongoven, supra note 464 at 257, citing the
FTC which claims innovation to be the lifeblood o f our economy.
VC. J. Baer & D. A. Balto, supra note 173 at 220; Nicholas A Widnell, The Crystal Ball O f Innovation Market
.Analysis In Merger Review: .An Appropriate Means O f Predicting The Future? (1996) 4 Geo. Mason L. Rev.
72
playing an important role in determining what influence transnationali2ation exerts on U.S.

merger review, the concept o f reduced innovation by M & As is far from being clear.'469 FTC
and DOJ tie any intervention to clear perception o f a link to a specified product and the neces
sity o f specialized assets or technical expertise.4 0 They also recognize that the market definition
set out in the 1992 Merger Guidelines does not fit the peculiarities of innovation markets, and
replace the SSNIP technique by the concept o f a small but significant and nontransitory re
duction in research and development efforts.41 Nonetheless, this attempt to create a graspable
model o f innovation markets and their functioning cannot obscure the fact that the mechanisms
between the merger o f two researching firms, the market power, and the incentives to reduce
innovation activities the Agencies refer to, are not substantially more than guesswork.4 2 Re
garding the role o f incentives to innovate created by downstream markets, the Agencies them
selves seem not to have decided yet whether they are part o f the market delineation or o f the
assessment o f the anticompetitive effects or both.4 3 The firms involved often themselves lack a
consistent conception o f a precisely defined research track and what effects the new product, if
any, will have. The attempt to develop a scheme adapted to the particular features o f innovation
markets holds the danger of imposing too a static view on too a dynamic phenomenon.4 4 In
view o f these problems it is not surprising that the review o f innovation market-mergers some
times turns out as mere trial and error. In its decision Knogo Corp. and Sensormatic Elec
tronics Corp., the FTC did not take the pains to explain its conclusion o f reduced incentives to
further pursue research on integrated shoplifting protection systems4 \ despite the fact that this
market does not show a level o f sophistication leading to insurmountable barriers to entry
369 at 369 with a list o f those who crinzed the approach during the Federal Trade Commissions, Hearings on
Global A n d Innovation-Based Competition, online: <http://www.ftc.gov/opp/gic.htm> (date accessed: Aug. 20th,
a"
4*3
2000).
That already starts wtth the definition o f an innovation market. So far one o f the rare feasible explanations is
furnished by the Antitrust Guidelines For The Licensing O f Intellectual Property issued by FTC and DOJ in 1995, 4
Trade Reg. Rep. (CCH) 13132 (1995), sec. 3.2.3 [hereinafter 1995 Intellectual Property Guidelines]: An in
novation market consists o f the research and development directed to particular new or improved goods or
processes, and the close substitutes for that research and development. The close substitutes are research and
development efforts, technologies, and goods that significantly constrain the exercise o f market power with
respect to the relevant research and development, for example by limiting the ability and incentive o f a hypo
thetical monopolist to retard the pace o f research and development. The Agencies will delineate an innovation
market only when the capabilities to engage in the relevant research and development can be associated with
specialized assets or characteristics o f specific firms.
V. S. Quinn, supra note 429 at 667.
Richard J. Gilbert & Steven C Sunshine, Incorporating Dynamic Efficiency Concerns in Merger Analysis:
The Use o f Innovation Markets (1995) 63 Antitrust L.J. 569 at 594-95.
ibid. at 592-93.
see 1995 Intellectual Property Guidelines, supra note 469 sec. 3.2.3; Y. S. Quinn, supra note 429 at 670.
Y. S. Quinn, supra note 429 at 668; R. J. Gilbert & S. C. Sunshine, supra note 471 at 594: That scheme never
theless reveals lots o f parallels with the traditional concepts o f the Guidelines.
In the matter o f Knogo Corp. and Sensormatic Electronics Corp., FTC File No. 941-0026, Press Release o f April 21,
1995.
73
thereby preventing any potential market entry. On the other hand, the decision to block the
merger of Microsoft and Intuit in 1995 turned out to be an almost perfect fertilizer for ongoing
competition. Intuit retail sales tripled since 1 9 9 4 and continue to dominate the market o f
PF/checkbook software. More importantly, the continued competition between the parties
opened the way for tiny MECA Software, Inc. (MECA) to become a major com petitor/6 By
19 9 7 ,
MECA was distributing about 4 5 0 0 0 copies o f its program M anagin g Your Money each
month. In 1998 MECA struck a deal with Intuit to customize the Quicken software for individ
ual banks another competition against Microsoft. Had the merger o f 1 9 9 5 taken place, the
level o f competition subsisting in 1998 would never have been reached.4 The overall picture of
the success o f merger enforcement on innovation markets remains ambiguous despite the fact
that they provide for a field particularly susceptible to protectionism and instrumentalization/'8
(2) V e r t ic a l I n t e g r a t io n
After a decade o f inactivity FTC and DOJ have also recendy proven that they are increas
ingly aware o f the competitive dangers o f vertical integration. The FTCs chairman noted that
[t] he antitrust agencies have begun to look more critically at vertical mergers and joint ven
tures and challenged several vertical mergers.4 9 In this context the Agencies have left the tradi
tional foreclosure approach and centered more on the horizontal effects o f vertical integration,
viz., how this integration will affect rivals by raising their costs even in the absence o f foreclo
sure.480 Yet, the impact on downstream rivals caused by denying access to essential inputs or
increasing their costs (input foreclosure), and by denying access to downstream oudets for up
stream producers products, thereby raising upstream rivals cost (customer foreclosure), is not
completely neglected.481 Above all, FTC and DOJ are increasingly sensitive about the issue o f
access to information concerning rivals that is granted by vertical integration.482 All these postChicago approaches although fiercely disputed have led to a stricter enforcement against
4"c
Largely neglecting direct retail sales, MECA which is now co-owned by seven banks focused on selling its
PF software directly to financial institutions which combine it with their own online banking services to their
customers.
4 VC. H. Page, supra note 93 at 20, however, argues that the outcome o f the case is merely the result o f Micro
softs competitors intensive lobbying.
4-8 K- J. Arquit & R. Wolfram, supra note 292 at 575.
4'9 Robert Pirofsky, Vertical Restraints and Vertical Aspects o f Mergers - A U.S. Perspective speech o f O ct
16 th, ) 9 9 7 > online: <http:// www.ftc.gov/speeches/pitofsky/fordham7.htm> (date accessed: Aug. 20th,
480
481
2000 ).
see Stanley M. Besen et al., Vertical And Horizontal Ownership in Cable TV: Time Wamer-Tumer in: John
E. Kwoka & Lawrence J. White, eds., The Antitrust Revolution, 3"* ed. (New York: Oxford University Press,
1999) 452 at 461-63; J. T. Halverson, supra note 135 at 78.
M. Howard Morse, Vertical Mergers: Recent Learning (1998) 53 Bus. Law. 1217 at 1228.
74
with permission of the copyright owner. Further reproduction prohibited without permission.
vertical mergers even when occurring between internationally competing U.S. firms.483 In other
words, a purposeful abandonment o f enforcement activities against vertically integrating U.S.
firms cannot be perceived.
2.
E f f ic ie n c i e s E s p e c ia l l y
As a result o f the understanding of competition that prevails in U.S. antitrust law the notion
of efficiencies is central to merger review.484 Sec. 4 o f the 1992 Merger Guidelines introduced a
sliding-scale-approach that allows, at least theoretically, the justification of anticompetitive
mergers on the grounds o f an alleged generation of efficiencies.483 Given this potential, efficien
cies form an almost ideal instrument to undermine merger review for the purposes o f gaining a
higher degree o f international competitiveness. The demand for an increased consideration o f
possible efficiencies is, consequendy, frequendy uttered by U.S. industrials.486
Against the background that M & As are in recent years more strategically than merely fi
nancially motivated, the assumption that efficiencies are often real and realistic goals is undeni
able.48 Yet, the existing danger of a latent instrumentalization is aggravated by the fact that,
even when handled sensibly, efficiencies raise numerous problems. Efficiencies, as based on an
economic model, require an in-depth analysis o f various facts.488 As only the parties are in the
position o f being able to produce the necessary information, any efficiency claim is highly sus
ceptible to manipulation. The requirement to verify each asserted efficiency by reasonable
means which is imposed on the parties yields the way for broad interpretation and does not
prevent abuse of the efficiency defense.489 When the key operative terms are inherendy vague,
value-judgements and policy choices may well be submerged in tacit definitional assumptions.
482 K. J. Arquit & R. Wolfram, supra note 292 at 565.

483 see e. g. in the matter of Time Warner; Inc. et aL. Complaint, supra note 451; M. H. Morse,supra note 481 at 1217.
484 For the notion o f efficiencies and their most important manifestations seeabove Chapter 2, B. II. 1at 29 and tn.
28.
485 In this form the efficiency defense is a feature almost unique to U.S. merger review. Other jurisdictions, for
instance the EU, do not recognize efficiency gains to such a degree, see Todd R. Overton, Substantive Dis
tinctions Between United Stares Antitrust Law .And The Competition Policy O f The European Union: A
Comparative Analysis O f Divergent Policies (1991) 13Hous.J. Intl. L. 315 at 321.
The 1992 Merger Guidelines only address horizontal mergers, whereas for vertical integration the 1984 Nonhorizontal Merger Guidelines are to be applied. Notwithstanding this fact, the following remarks are in princi
ple applicable to veracal mergers, as well.
486 N. a., Witnesses At FTC Globalization Hearing Urge De-Emphasis O f Market Concentration B N A A n ti
trust C~ Trade Regulation Daily (Oct. 19th, 1995) ATD d2; Proposals, supra note 173 at 217.
48~ IX'. J. Baer & D. A. Balto, supra note 173 at 209.
488 S. D. Johnson & A. M. Ferrill, supra note 9 at 584.
489 When the 1992 Merger Guidelines were first adopted, die formulation o f dear and convincing evidence to
which a higher degree of substantiation is inherent was omitted in favor of the reasonability standard.
75
The National Association of Attorney Generals, the authorities responsible for the enforcement
of antitrust provisions in the states, takes a more skeptical view to allegations and evidence o f
synergies produced by the parties490, and so do the courts.491
Second, efficiencies are extremely difficult to quantify.492 Although the Merger Guidelines
concede that there exist different categories o f efficiencies that are to varying extents cogniza
ble and substantial, the concept remains woolly. Any ex-ante decision as to efficiencies that
might mitigate anticompetitive results is by its very7 nature mere speculation.493 The disclosure
requirement imposed by the mandatory pre-merger notification does not prove to be helpful, as
the Agencies themselves often do not know what information they need. The complexity7 of
measurement is further exacerbated by the sliding-scale-approach incorporated in the Guide
lines an approach that is in itself disputable.494 How many U.S. S do the firms involved have to
save by economies o f scale in order to set off an HHI increase of 100 points in moderately con
centrated markets? How many in a highly concentrated market? The meager information con
tained in the Guidelines that [efficiencies almost never justify7 a merger to monopoly or near
monopoly7 is not o f much use answering these questions.493 The underlying reason for the justi
fying function of efficiencies is that they may improve a firms ability7 and motivation to com
pete and thereby result in a decrease o f prices, improved quality7or other benefits for consum
ers.496 However, there exists no verification mechanism as to whether the alleged effects are
realized and/or passed on to the downstream market The lack of post-merger control is inher
ent to the ex-ante review system Congress has opted for49, and a reservation allowing the un
scrambling of merged firms in the case o f failure is not feasible. Yet these uncertainties should
lead the merger review practice to be extremely cautious in use of the efficiency7defense, and to
resist approval on the grounds of efficiency claims alone.
491
49:
493
494
495
496
49
National Association o f Attorney Generals, Horizontal Merger Guidelines, 4 Trade Reg. Rep. (CCH)
13406
(1993), sec. 5.3: [o]nly in rare conditions (...) when the merging parties can demonstrate by clear and con
vincing evidence that the merger will lead to significant efficiencies.
Against this background the contention o f the FTCs chairman that the revision o f sec. 4 o f the 1992 Merger
Guidelines was a reaction o f the introduction o f the efficiency defense by the courts is not accurate, contra
Efficiencies, supra note 102 at 486.
Dennis A. Yao & Thomas N. Dahdouh, Information Problems In Merger Decision Making And Their Im
pact On Development O f An Efficiencies Defense (1993) 62 Antitrust L.J. 23 at 35.
Ashutosh Bhagwat, Modes of Regulatory Enforcement and The Problem o f Administrative Discretion
(1999) 50 Hastings L_ J. 1275 at 1319; S. D. Johnson & A. M. Ferrill, supra note 9 at 586; Efficiencies, supra
note 102 at 205.
Such a technique was, for instance, rejected by the Supreme Court in United States v. Procter e~ Gamble 386 U.S.
568, 581 (1967): Possible economies cannot be used as a defense to illegality.
Very sceptical toward efficiencies, F. M. Scherer & D. Ross, supra note 172 at 172-73.
Section 7 Clayton Act: may (...) to lessen competition.
76
Although the Agencies meanwhile concede that sheer redistribution of revenues can only to
a limited extent be taken into account, the practice o f merger review still entirely disregards the
possibility' o f efficiency losses (inefficiencies). Efficiencies cannot be generated to infinity; start
ing from a certain size o f firm they reverse to cost progressions.49* Especially for the admini
stration o f an enterprise, increasing si2e sets o ff frictional resistance, let alone the questions of
discretion and organizational slack that additionally impede the realization o f synergetic poten
tial.499 Furthermore, every' merger leads to cost created by the necessity of adjusting the activities
o f the firms involved (compromise cost).500 Merging firms whose cultures show a low degree
o f compatibility possibly face considerably high compromise cost, particularly if the consum
mation o f the merger results in reorganization and restructuring including partial lay-offs o f the
workforce. As such reorganizational measures generally form a condition for attaining the
hoped-for efficiencies, the realization o f synergies is almost inextricably linked to efficiency
losses. Empirical statistics reveal a failure rate o f approximately 50% o f all M & As which points
to the fact that possible inefficiencies are frequendy underestimated.501
The question remains as to whether this highly efficient tool for the circumvention o f the
exigencies o f competition is used to promote the competitiveness o f U.S. firms. Several factors
indicate that this is the case. The incorporation o f the sliding-scale-approach into the Merger
Guidelines conceptually leveled the path for justifying any merger on the grounds o f alleged
efficiencies, the only exception being very' large horizontal consolidations. Since the adoption of
the new sec. 4, only four cases have come to litigation because o f a rejection o f the efficiency
claims by the Agencies three of which were M & As in the health care sector.502 In some in
stances the incentive to support the U.S. industry' by relying on efficiencies gets an interesting
twist. In the defense sector, having arguably undergone a phase o f downsizing and consolida
tion, and faced with lower procurement levels and fewer new projects on the horizon, efficien
cies are indeed an important driving force for the merger wave for the simple purpose o f eco
498 F. M. Scherer & D. Ross, supra note 172 at 102 ft.

499 ibid. at 104.
500 Christian Westemhausen, Die Relevarn^ con Effityen^iorteilen in der US-amerikamschen und deutschen Fusionskontrolle
(Gottingen: Diss., 1991) at 16.
501 n. a., Why merge?, online: About The Human Internet <http://www.about.com/smallbusinesses/ en
trepreneurs/library/weekly/ aa011600b.htm> (date accessed: Aug. 20th, 2000); F. M. Scherer & D. Ross, su
pra note 172 at 172-73; Federal Antitrust Policy, supra note 58 at 446.
502 FTC v. Staples, Inc. and Office Depot, Inc. supra note 101; United States v. Lang IslandJeuish Medical Center, supra note
443; F TC v. Tenet Healthcare Corp., supra note 443; F T C v. Cardinal Health, Inc., Bergen Brunswick, Corp. v. McKes
son Corp., AmeriSource Health Corp., supra note 219.
77
nomic survival. But apart from this fact many defense enterprises are large contractors o f the
DOD. In the Boeing/McDonnell-Douglas case the D O D could, after the approval o f the
merger by the FTC, as the consumer reap all the benefits o f economies of scale and other
efficiencies produced by the amalgamation o f the firms.503 So fiscal interests also influence a
manipulative use of efficiencies. To sum up, in view o f the high potential for instrumentaliza
tion, the average concentration level in instances o f eventually enjoined mergers, and the vast
number o f approved transactions without an in-depth investigation, there is a very significant
probability o f transnationalization-generated alienation o f the efficiency defense.30*
I I I . M e r g e r s I n v o l v in g N o n -U .S. F ir m s
Due to transnationalization, M & As involving foreign firms play an important rule in U.S.
merger review. In average years, more than 500/o o f the FTCs full merger investigations com
prise Non-U.S. enterprises, or assets, or information located abroad.505 O n a quick-look analysis
the application of Section 7 Clayton Act and the framework provided by the Merger Guidelines
on these M & As does not appear to be substantially different from the review o f U.S. merg
ers. This would be consistent with the statement made by the Agencies in sec. 2 o f their Anti
trust Enforcement Guidelines For International Operations, according to which foreign com
petitors will not be discriminated against.506 A closer look, however, reveals that there are vari
ances, some o f which might be the product o f calculated manoeuvres.
1.
M a r k e t D e l i n e a t i o n , C o n c e n t r a t i o n , A n d M a r k e t Sh a r e s
To a certain extent the delineation o f the relevant geographic market is not free from arbi
trariness. The frequent confinement o f the geographic market to the U.S. regularly lacks any
convincing explanation. For instance, the allegation o f the U.S. being the relevant market in the
SNIA case50 is inconsistent with the procedure set out in sec. 1.21 o f the 1992 Merger Guide
lines which states that the assessment o f the relevant markets always starts with the parties lo-
503
504
505
506
50'
Aaron Schildhaus et al., Aviation and Aerospace Law (1998) 32 Intl. Lawyer 437 at 440. Eventually, all
monvanons underlying the attempt to instrumentalize merger control root in considerations o f public utility
values such as tax revenues and employment rates.
For the problem o f data availability concerning approvals, see below Chapter 4, B. II. 2. at 84.
R. G. Parker & D. A. Balto, supra note 173 at 354. This figure, however, is not undisputed; Douglas H. Ginsburg & Scott H. Angstreich, Multinational Merger Review: Lessons From Our Federalism (2000) 68 Anti
trust L. J. 219 at 219 speak o f approximately 25%.
U.S. Department o f Justice & Federal Trade Commission, Antitrust Enforcement Guidelines For International Op
erations, 68 Antitrust & Trade Reg. Rep. (BNA) No. 1707 (Spec. Supp. 1995) [hereinafter 1995 International
Operations Guidelines].
In the matter o f SNL4 S.p-A ., Complaint, supra note 400 at 9.
78
cation, which would have been Sweden and Italy respectively. The FTC does not demonstrate
why, considering the factors (1) (4) mentioned in sec. 1.21, customers would not procure the
relevant product abroad a possibility that does not seem to be too remote with regard to
heart-lung-machines.508 In contrast with the SNLA case, the FTC referred to a world-wide mar
ket in its complaint concerning the acquisition o f Elsag Bailev Process Automation N. V. by
ABB AB and ABB AG.509 A persuasive argumentation as to why customers leave the U.S. in
response to a SSNIP to purchase gas spectrometers, but would refrain from doing so when in
need o f a heart-lung-machine, cannot be deciphered from the Agencys submissions.310
On the other hand, when the FTC challenged the acquisition o f a British firm bv a U.S. en
terprise it found no difficulties in delineating a world-wide market for thinwall bearings, relying
on the argument that those goods could be purchased anywhere in the wodd as long as they
meet the highly individual specifications o f the customer.311 Surprisingly, the Agency ascribes the
existence o f high barriers to entry to exacdy these specification requirements that allegedly can
not be met by anyone else but the parties to the transaction.51' Even though the FTC eventually
decided to challenge the merger, this construction seems at the least to be inharmonious. The
engagement o f international firms as a consequence of transnationalization ordinarily leads to
broader markets. This broadening entails an increase in political pressure exerted on the Agen
cies.313 But even making allowances for this fact, and the although somewhat irrational psy
chological barrier, there appears to be a tendency to assume smaller markets when Non-U.S.
firms are involved in order to raise the concentration levels, block the merger, and prevent cost
externalities that could possibly be imposed on the U.S. economy.514
The same impression is left by the concentration levels to be found in the Agencies com
plaints against non-domestic mergers. The average post-merger HHI of all international cases
referred to in this thesis accrues to 4860.315 This figure, albeit well beyond the threshold o f 1800
508 Should such a procurement fail tor the reason o f a required FDA approval, the FTC wasat least obliged to
explicitly base its argumentation on this fact, which it, however, did not do.
509 In the matter o f ABB A G and A A B A G , FTC File 991-0040, Complaint o f April 14th, 1999 at para. 12.
510 In the matter o f Insilm Corp., FTC Docket N o. C-3783, Complaint o f January 27th, 1998 at3, lacking clarifica
tion for the assumption o f the U.S. as the area where the procurement o f aluminum tubes takes place; seealso
in the matter o f Guinnessp.Lc., Grand Metropolitanp.Lc., and Diageo p.Lc., Separate Statement, supra note 357, with
justified cnnque to the exclusion o f U.S. products.
511 In the matter o f Federal-Mogul Corp. and TcrN p.L c., Complaint, supra note 363 at para. 11.
51- ibid. at paras. 18-22.
513 D. Snyder, supra note 438 at 137.
514 ibid.
515 see belou Appendix, Table 3 at XXXIV.
79
points, is considerably lower than the level reached by the transactions involving U.S. under
takings only.516 The interplay o f market definition and concentration level compared with the
values revealed by the analysis of the cases mentioned under II. strongly indicates that there are
double standards being applied.
2.
As s e s s m e n t O f A n t i c o m p e t i t i v e E f f e c t s
An instrumentalization o f merger review with regard to the assessment o f anticompetitive

effects generated by M & As o f Non-U.S. enterprises is most obvious in innovation markets. It
shall be exemplified by the FTCs challenge o f the Gba-Geigy/Sandoz merger. In this pro
ceeding the effect the FTC was most concerned with was the reduction o f innovation activity in
the market o f gene therapy.1 Still, the documents do not provide more than a superficial ex
amination o f the factors that eventually would lead to diminished innovation incentives, thus
colliding with the requirement imposed on FTC and DOJ by the courts to explicidy state cir
cumstances that unmistakably indicate such a reduction.518 A deficiency o f substantive factual
material runs across the entire gene therapy market analysis. The reference to a market that does
not even exist in nucleic form, but which is estimated to reach a volume o f U.S. S 45 billion
after a period o f approximately 15 years, must be viewed as completely speculative.519 This,
again, contrasts with the persuasiveness o f the DOJs argumentation in the Microsoft/Intuit
case, where fierce competition had already led to hard innovation activity and where its reduc
tion as a result o f a merger was to be strongly expected. Still, this case involved only U.S. firms.
It takes a considerable effort to supercede the impression that the Agencies regularly resort to
pigeonholing the facts o f a specific case, particularly when assessing anticompetitive effects.
The allegation of insurmountable barriers to entry in the SNLA case is, among other factors,
founded on the assumption that the merger would create a killer portfolio of patents and
other intellectual property in the hands o f the merged entity that would seal the market for
years.520 In a transnationalized economy where enterprises throughout the world are combining
their resources to realize synergy potential, the barriers to entry in particular deserve a complete
see above Chapter 4, A. II. 1. b) at 70.

In the matter o f Gba-Getgy Lid. et aL, Complaint, supra note 98 at 9.
see V. S. Quinn, supra note 429 at 666.
The whole innovation market problem resembles in many ways the, admittedly much more concrete, potential
competition doctrine that was once rejected by the Supreme Court as to be too speculative, United States v.
Falstafj"Breat,:g Corp., 410 L.S. 526, 560-62 (1973).
In the matter o f Ciba-Gdgy L id et aL, Complaint, supra note 98 at 8.
80
in-depth investigation. There are a number o f economists that deny the possibility o f a fore
closed market.321 Although this radical standpoint is doubtful regarding markets that require a
huge infrastructure in order to participate, it is valid regarding innovation markets which are o f
much more intangible character and therefore less predictable.
The shallowness o f effect estimation and entry analysis is no t unique to innovation markets.
The enjoinment o f the merger between BP and Amoco is also founded on a mere laconic alle
gation o f the elimination of competition and insufficiency o f market entry.322 Hence, the as
sessment o f anticompetitive effects seems as well not to be completely free o f a proclivity to
discriminate against Non-U.S. firms.
3.
R e m e d ie s
A last aspect worth being mentioned is the choice of remedies suggested by the Agencies.
Although most challenges - be it those involving only U.S. firms or others were solved by
divestiture, it is noticeable that behavioral remedies are used to a lesser extent in order to over
come competition-related concerns raised by Non-U.S. mergers. In fact, there is only one ex
ample in all the cases presented here that ended in a non-structural remedy.523 And even here, in
deviation from its purported approach to vertical integration, the DOJ did not focus on possible
effects on the cost o f rivals but chose the traditional foreclosure approach.324 Without reading
too much into that decision, it can be seen that the DOJ was far more concerned with the de
crease o f chances for U.S. service providers to enter the market o f transatlantic telephony than
with price increases imposed on U.S. consumers. Finally, the Agencies often prefer structural
solutions that consist in divesting certain assets to U.S. firms.525 Particularly in innovation mar
kets this is a suitable tool to ensure that U.S. industry does not lag behind.
521 see e. g. B. D. Garland & R. R. Levary, supra note 198 at 49.

s In the matter o f British Petroleum Co. p.Lc., Amoco Corp., BP Amoco Corp., Complaint, supra note 337 at paras. 15,
16, 20, 21. The FTC took considerably more pains to explore the possible anticompetitive results o f the
planned Shell/Texaco joint venture, in the matter o f Shell Oil Co. and Texaco, Inc., FTC File No. 971-0026,
Analysis To Aid Public Comment o f Dec. 12*, 1997, 62 F.R. 67898 at 67869.
523 United States v. Sprint Corp. andJoint I enture Co., Civil Action No. 95 CV 1304, Final Judgement 1996-1Trades
Cases 71300 (D. D. C. July 13*, 1995).
524 United States v. Sprint Corp. andJoint Venture Co., Civil Action No. 95 CY 1304, Competitive Impact Statement
o f July 13*, 1995.
525 In the matter o f British Petroleum Co. p.Lc., Amoco Corp., BP Amoco p.Lc., Statement, supra note 338 at 1, fn. 3.; in
the matter o f Ttablisscments Delhaipe Freres et Cit. Le Lion S. A .; Delhaipe America, Inc.; Hannaford Bros. Co., FTC
File No. 991-0308, Decision And Order o f July 25*, 2000 at I. FC.-M.; in the matter o f Show's Supermarkets, Inc.;
J. Sainsbury p.Lc.; Star Markets Holdings, Inc., FTC File No. 991-0075, Decision And Order o f April 5*, 2000 at
II. A., B; see also below Appendix, Table 3 at XXXIY.
81
IV . P r o v is io n a l R e s u l t
The enforcement actions indicate that policy considerations generated by increased interna
tional competition between firms and economic systems play a vital, although not exclusive, role
in guiding FTC and DOJ to their respective decisions to approve or reject a merger.526The U.S.
takes part in a wodd-wide game o f passing the buck on to someone else, i. e. trying to exter
nalize any cost of anticompetitive effects of mergers, and despite the transnationalization proc
ess a complete ban o f industrial welfare concerns from merger review is illusionary. And yet, no
general policy of strong discrimination of foreign firms or favoring U.S. enterprises is discerni
ble. Instrumentalization of merger review can only be detected in a small although not infinitesimally so number o f single cases, and its discover}7 requires a careful look at each element
o f the merger analysis conducted by the Agencies. A certain degree o f leniency in merger review
might serve as a further symptom o f the politicization. In the fiscal year 1998 there were 1700
filings under the notification system established by the Hart-Scott-Rodino Antitrust Improve
ment Act (HSR-Act).32 Generally, less than 4% o f all mergers receive investigation and less than
2 o are challenged. In the 1999 fiscal year the FTC issued 18 consent decrees and 12 transac
tions were abandoned.528 The only sector which shows an increased merger enforcement are
vertical mergers, and this one also reveals a lack o f consistency and a number o f intuitively made
decisions.329
Still, it would not do justice to the basic problems o f merger review to blame the heteroge
neous practice and its inconsistencies on policy considerations alone. As mentioned, there ex
ists, for example, a general confusion as to the relevance of non-structural factors. It might even
be that it is simply not possible to precisely and objectively define an unacceptable structural
restraint.530 M & As are strategic actions to the effect that they change forever the undertaking
enterprises and the set o f viable strategies at the disposition o f the merged entity' in any future
market activity. Merger review still employs a standard industrial organization analysis that tries
to boil down the merger to potential shifts in static cost and demand curves and focuses on the
526
sr
528
529
k. Luz, supra note 298 at 156; D. Snyder, supra note 438 at 135-36; M. B. Coate & A. N. kleit, supra note 465
at 5.
15 L'.S.C.S. 18a (1991).
R. Parker & D. A. Balto, supra note 173 at 351, 353; see also F. M. Scherer quoted in Peter Passell, When
Mega-Mergers .Are Mega Busts" The New York Times (May 14th, 1998) 4 (Week in Review) at 18: Mergers have
to be flat-out anticompetitive to attract the attention o f the antitrust division.
H. M. Morse, supra note 481 at 1228.
82
effects o f the transaction on short-run pricing dynamics, thereby missing the essence o f what
business is about.
B.
F u r t h e r P roblem s
I.
T h e R o l e O f N e g o t ia t e d So l u t io n s
1.
H a r t -S c o t t -R o d i n o A n d I t s E f f e c t s
In 1976 Congress enacted the Hart-Scott-Rodino Antitrust Improvement Act (HSR-Act).331

The HSR-Act constituted a mandatory notification procedure for all M & As that satisfy two
tests: (1) the size of person test and (2) the size o f transaction test. Either size must exceed
certain thresholds in order to make the merger subject to the notification requirement.532 The
main objective of the Act was to provide FTC and DOJ with information which, prior to 1976,
they could only acquire by accident, and to prevent irreparable harm being caused by the irre
versible consummation o f anticompetitive mergers.533 This legislation constitutes a predisclosure
regime combined with a waiting period, the latter being subject to extension or reduction de
pending on the concerns raised among the Agencies staff.
The most significant effect o f the HSR-Act consists o f the considerable reduction o f
merger-related litigation.334 Apart from the field o f the hospital industry, doctrinal development
through litigation has almost completely disappeared. Since 1974 there has not been any sub
stantive merger decision by the Supreme Court. While the number o f merger challenges has
tripled since the HSR enactment, the number litigated has dropped by 80 o.535 The Sta
ples/Office Depot case536 was the first litigated case since 1992. One explanation for this devel
opment is that the HSR-Act intentionally shifted the focus from the jurisprudential ex-post per
spective to an ex-ante administrative review that often renders the judicial option impracticable.
530
531
532
533
534
Andre Fiebig, A Role for the WTO in International Merger Control (2000) 20 J. Intl. L. Bus. 233 at 244.
15 U.S.C.S. 18a (1991).
The interplay o f the thresholds turns out to be highly complex and is broken by numerous exemptions. A
detailed examination would go beyond the scope o f this thesis and is therefore omitted.
William J. Rowley & Donald I. Baker, International Merger The Antitrust Process, 2nd ed. (London: Sweet &
Maxwell, 1996) at 1660.
Spencer Weber Waller, Prosecution By Regulation: The Changing Nature O f Antitrust Enforcement (1998)
Oreg. L. Rev. 1383 at 1397 [hereinafter Prosecution]; William J. Kolasky Jr. & James W. Loewe, The
Merger Review Process at the Federal Trade Commission: Administrative Efficiency and the Rule o f Law
(1997) 49 Admin. L. Rev. 889 at 890-91.
Joe Sims & Deborah Herman, The Effect O f Twenty Years O f Hart-Scott-Rodino On Merger Practise: A
Case Study In The Law O f Unintended Consequences To Antitrust Legislation (1997) 65 Antitrust L. J. 865
at 866-67.
83
The reduction o f litigation has led to another outcome, i. e. the replacement o f statutes en
acted by Congress and their interpretation through judge-made case law with administrative
policy declarations and decisions.33 The Merger Guidelines publicized by FTC and DOJ have
become the most influential source o f merger law.53* Even though these Guidelines purport to
be a mere statement o f enforcement policy, they now are a form o f administration-made law on
which the courts, on the rare occasions o f litigated mergers, rely.539 This is aggravated by the
Chevron Doctrine which calls for judicial deference to administrator}' interpretation o f law on
the grounds o f an assumed expertise.340 The ever-increasing weight o f the Merger Guidelines is
reflected by the evolution o f their size and complexity from seven pages in 1968, to fifteen
pages in 1982 covering horizontal and vertical mergers, to fifteen pages in 1992 covering hori
zontal mergers only and supplemented by many other Guidelines, the most recent ones being
the Draft Antitrust Guidelines For Collaboration Among Competitors addressing the treatment
o f joint ventures.541
2.
A d m in is t r a t iv e D is c r e t io n A n d N e g o t ia t e d S o l u t io n s
Both FTC and DOJ can, instead o f litigating, settle any issues with regard to a transaction
by a negotiated solution the consent decree or consent order. The DOJ must file a proposed
consent decree in court and publish it in the Federal Register. According to the Tunney Act542, it
must also prepare a competitive impact statement containing, inter alia, an explanation o f the
decree and a description and evaluation o f alternatives, both o f which are to be published in the
Federal Register. Any interested party- can file comments or an application with the court to
participate in the courts consideration o f the settlement. Under the Tunney Act, courts are di
rected to make a determination as to whether the proposed settlement will be in the public in
terest.343 The notion o f public interest does not, however, suggest that the proposed settlement
536 F TC v. Staples, Inc. and Office Depot, Inc., supra note 101.
5r Prosecution, supra note 534 at 1398.
538 Michael Malina, Some Thoughts on the Source o f Antitrust Law in the Nineties (1995) 63 Antitrust L. J.
853 at 854.
S3<) U.S. Anchor Mamfacturing, Inc. v. Rule Industries, Inc., 7 F.3d 986, 999(11th Cir. 1993): Dr. Pepper/Seven-UpCos.,
Inc. et aL v. FTC, 991 F.2d 859, 865 (D. C. Cir 1993);United States v.Eastman Kodak Co., 63 F.3d 95, 106 (2nd
Cir. 1995); United States v. Engelhard Corp. et aL, 126 F.3d 1302, 1304-05 (11th Cir. 1997).
540 Cheiron
Inc. v. Natural Resource Defense Council Inc., 467 U.S. 837, 842-43 (1984).
541 U.S. Department o f Justice & Federal Trade Commission, Draft Antitrust Guidelines fo r Collaboration Among
Competitors o f Oct. 1, 1999, online: <http://www.ftc.gov/os/1999/ 9910/jointventure guidelines.pdf> (date
accessed: Aug. 20th, 2000) [hereinafter 1999 Joint Venture Guidelines].
w- 15 U.S.C.S. 16 (1991).
543 15 U.S.C.S. I 16 (e) (1991).
84
provides an ideal solution from the judges perspective.544 In the case o f the FTC, the settlement
package consists o f a complaint and an annexed consent order, which, following a period for
public comment and approval by the FTC545, becomes the FTCs order settling the matter.
Against the background o f low litigation it is not surprising that the majority' o f challenges
are settled by negotiation. For merging enterprises the time factor is crucial, and the threat o f an
indefinite delay be it because o f a demand for additional information (Second Request) or the
necessity to spend a few years in litigation forces the parties almost always to an acceptance o f
the suggested solution, sometimes with their fists clenched.546 This lopsidedness o f bargaining
power leads to the result that merger law is not only set by the Agencies Guidelines but also by
their merger decisions.34 A recent example o f such law-making is the creation o f the innova
tion market model which occurred completely insulated from case law.
Discretionary power might be used to enforce legal standards to a greater extent than fore
seen by the legislator as well as to underenforcement.344 Thus, the ample discretion given to
FTC and DOJ by the HSR-Act, combined with the little guidance by court decisions, entails a
consequence which is of importance for the possible influence on merger review exerted by
transnationalization. Merger review and antitrust law are substantively not more than a set o f
principles. Their administration requires a fair amount of technical expertise and practical expe
rience. This openness also generates susceptibility' to capture by all kinds o f factors. The risk o f
capture is reduced if the decision-makers are impartial courts, or at least administrative organs
constrained by judicial control or an interest-balancing mechanism. In the current absence o f
these factors the merger review procedure runs the risk o f not being practiced to maximize
public welfare but rather of becoming a battleground for other interests.349
seee.g. United States v. Western Electric Co. and A T c~ T , 592 F.Supp. 846, 856 (D. D. C. 1984).
The first draft o f the consent order is designed by the Economics and Competition Division o f FTC only,
whereas the final approval requires the accord o f the entire Commission.
The HSR-Act, 15 L'.S.C.S. 18a (e) (1) (1991), confers on the Agencies an essentially unreviewable power to
demand thousands o f boxes o f documents, marked and indexed in a particular way, all organized in file fold
ers with particular labels and placed in boxes o f a particular size, with overseas documents translated.
A. Bhagwat, supra note 493 at 1304.
ibid at 1309.
For this reason there is an ongoing discussion about the establishment o f an Independent Counsel to super
vise the enforcement activities o f the Agencies, see James P. Fleissner, The Future o f the Independent Coun
sel: Confronting the Dilemma o f .Allocating the Power o f Prosecutorial Discretion (1998) 49 Mercer L. Rev.
427 at 427.
85
This is precisely suggested by the public choice theory.550 This theory assumes that anti
trust law is shaped by the interactions between well-organized private interest groups seeking
protection from the forces o f competition and politicians or other government officials seeking
to maximize their own personal welfare.51 Even though that might be an exaggerated formu
lation, the diagnosis is to a certain extent supported by the decision practice analyzed above.
The Agencies are granted budgets by committees of Congress whose members depend on the
votes o f their constituencies and therefore take these parochial concerns into account.52 If the
Agencies injure certain businesses and industries connected to committee members then these
will be displeased and financing will become harder to attain.553 A rarely mentioned fact is that
the funding of FTC and DOJ is fed in large part by the fees to be paid for each notification
under the HSR-Act.554 Too rigid enforcement would slow down merger review and merger ac
tivity leading to lower fee-based revenues. This puts a new complexion on the increased en
forcement activities o f the Clinton Administration which often end with minor negotiated
changes to the deal initially proposed.55
In a transnationalized environment shaped to a great extent by augmented international

competition, a strong likelihood o f instrumentalization o f merger review for the purpose of
enhanced competitiveness and attractiveness o f the U.S. economy for foreign investors can
hardly be dismissed. Beyond the scale o f heterogeneity' and partiality made perceptible by the
mandatorily publicized merger decisions, there is a further factor that fosters instrumentaliza
tion. Information used in administrative processes is generally subject to the Freedom o f Infor
Fred S. McChesney & William F. Shughart II, Public-Choice Theory And Antitrust Policy in Fred S.
McChesney/William F. Shughart II, eds., The Causes A nd Consequences of Antitrust: The Public Choice Penpectiiv
(Chicago: The University o f Chicago Press, 1994) 7 at 7 ff.
ibid. at 8; VC'. H. Page, supra note 93 at 6; even Milton Friedman recendy stated that he has come to realize that
antitrust does more harm than good because it tends to become prey to special interests, quoted in Ger
ald F. Seib, Libertarians Choose Sides As Antitrust Case Expands W all St. J. Interactive E d (June 9*, 1998),
online: <http://mteracnve.wsj.com> (date accessed: Aug. 3"*, 2000); W. F. Shughart et al., supra note 204 at
181 submit that antitrust policy in the face o f foreign competition is a mere choice between protectionist opnons that is geared to the maximization o f political payoff to rational, self-interest-seeking policy makers.
ss: Alissa Maede, Modeling A European Competition Authority (1996) 46 Duke L. J. 153 at 186-87.
Prosecunon, supra note 534 at 1429; VC'. J. Baer & D. A. Balto, supra note 173 at 212: The Agencies are
chronically underbudgeted and have to operate with the same staff and money as twenty years ago despite the
constandy raising figures o f merger activity. See W. F. Shughart II et al., supra note 204 at 185 ff. who contend
the existence o f a regular increase in the Agencies funding as result o f increased imports in order to finance
protectionist enforcement.
J. Sims & D. Herman, supra note 535 at 883-84. The current fee is 45000 U.S. S.
In addition to this there exists the Government Performance And Results A ct of 1993, Pub. L. No. 103-62, 107 Stat.
285 (codified in scattered sections o f 5 and 31 U.S.C.S.) which requires Agencies to prepare performance
plans coveting each program activity set forth in its budget and to express goals in an objective and quantifi
able form. Each governmental agency will strive to fulfil and exceed, if possible, this Five-Year-Plan.
86
mation Act (FOIA) and has to be disclosed.356 However, any material submitted during an HSR
pre-merger notification is expressly exempted from these provisions. The Tunney Act, a prod
uct o f the same period as the HSR-Act and intended to introduce more transparency into the
consent decree process, prorides only that such material as may be relevant to any administra
tive or judicial action or proceeding is to be made public.55 Yet this Act applies only to the
DOJ and not to the FTC. Consequendy, publication is mandatory only in cases where a merger
challenge is setded by a consent agreement or through the fact o f early termination, that is the
approval o f a transaction prior to the expiration o f the waiting period for the reason o f non
existence o f concerns.338 All agreements not to challenge a transaction that do not rest on a con
sent decree as well as the underlying facts for an eady termination are not brought to the pub
lic.339 The Agencies interpret the room left by regulations for discretionary disclosure very nar
rowly, and are extremely reluctant to produce any information they are not obliged to publish by
law.360 All this leads to the result that information concerning 96 o of all M & As subject to re
view by the Agencies is not available.561 Arguably, the majority' o f these transactions generate no
anticompetitive consequences, but assuming that the challenged cases form the demarcation
line, merger review sets in at a level considerably above the alleged threshold of tolerance.
Moreover, the different handling o f domestic and foreign mergers discernible in open
cases strongly supports the conclusion that under the cloak o f non-disclosure provisions many
transactions that are not o f a purely pro-competitive character pass the hurdles o f merger review
for the sake o f international competitiveness o f U.S. industry.
3.
R e m e d ie s
It has already been mentioned that structural remedies to merger challenges are most fa
vored.362 As a result of the increased international integration o f enterprises and markets, the
crafting of appropriate structural remedies, in particular divestitures, gets more and more diffi
cult. Innovation markets, for example, show a volatility that often impedes any reliable assess
ment of the effects of the remedies resorted to. For this reason, in 1999 the FTC conducted a
556 5 U.S.C.S. 552.

55 15 U.S.C.S. 18a (h) (1991).
558 15 U.S.C.S. 18a (b) (2) (1991). Usually, early terminations are published in the Federal Register. The FTC
also lists them on its VCeb Site, < http://www.ftc.gov/bc/earlyterm/index> (date accessed: Aug. 20th, 2000).
559 J. Sims & D. Herman, supra note 535 at 883.
560 U.S. Department o f Justice, Antitrust Division Manual, Chap. Ill D. 1. (e), online: < http://www.usdoj.
gov/atr/foia/divisionmanual/ch3.htm> (date accessed: Aug. 20th, 2000).
561 VC'. J. Kolasky Jr. & J. VC. Loewe, supra note 534 at 893-94.
562 set above p. Chapter 1, B. M I. at 20, Chapter 4, B. II. 3. at 81.
87
study o f the effectiveness o f the divestitures it had ordered in the preceding years.563 The most
important outcome o f this research was that the divestiture o f ongoing businesses provided for
the entry of a viable competitor rather than the divestiture o f selected assets. It also revealed
that the imposed establishment o f a continuing relationship between buyer and seller often re
sulted in anticompetitive behaviour. Finally, as a result o f the inquiry the divestiture periods
were severely shortened, from an average o f twelve months down to 3-4 months.
Apart from the fact that structural remedies provide in most cases for a more effective
strengthening of competitors, they also have the advantage o f requiring less monitoring than
behavioral ones.564 On the other hand, they might well prove to be problematic: when the FTC
ordered the licensing o f the HSV-tk gene therapy to Rhone-Poulenc Rorer S. A.563 it did obvi
ously not expect the licensee to merge with the Hoechst AG to form Aventis shortly after. Sub
sequent to this second merger, Rhone-Poulenc Rorer S. A. had to give back a license for
thrombin inhibitors to Novartis, the original licensor, as the transaction changed the entire
structure of the worlds pharmaceutical industry.566 An appropriate reaction to this transaction
would have been far more difficult, had the FTC insisted on a divestiture. With ongoing world
wide consolidations, such developments can never be excluded, and the possible results o f M &
As involving the buyer of assets or businesses should be taken into account to a greater extent.
It might be just for this reason that divestiture was the very remedy that the HSR-Act o f 1976
intended to limit36, but behavioral cures only have an equivalent role to structural cures in verti
cal merger cases.568
561 Federal Trade Commission, supra note 140.

564 see Helmut Bergmann, Settlements In EC Merger Control Proceedings: A Summary O f EC Enforcement
Practice And A Comparison With The United States (1993) 62 Antitrust L. J. 47 at 73, 87-90. Notwithstand
ing this fact, the Agencies do not always seem to be entirely sound in choosing the appropriate remedy: In the
BP/.Amoco case Commissioner Orson Swindle vigorously rejected the idea of non-existent supplier switching
by customers and independent tiiel sellers, jobbers, and favored a solution that did not provide for the di
vestiture of retail assets o f the parties, in the matter o f British Petroleum Co. p.Lc., Amoco Corp., BP Amoco Corp.,
Statement Swindle, supra note 347. With regard to the Exxon/Mobil merger he suddenly was o f a different
opinion, supporting the divestiture o f gas stations in order to prevent vertical integration, in the matter o f
Etocon Corp. and M obil Corp., FTC File No. 991-0077, Separate Statement o f Commissioner Orson Swindle o f
January 18th, 2000, 65 F.R. 2627. Similarly, it is not clear why the divestiture of retail assets, i. e. gas stations,
would reduce the incentive to interdependent pricing on the upstream market among a reduced number o f
competitors, compart in the matter o f Exxon Corp. and Mobil Corp., Analysis, supra note 264 at 2620.
565 In the matter of Ciba-Geigy Lid.eS aL, Decision And Order, supra note 418 at 19, 20.
566 In the matter o f Hoechst A G et aL and Rhone-Poulenc-Rortr S. A ., FTC File No. 991-0071, Analysis To Aid Public
Comment of Dec. 17th, 1999, 64 F.R. 71141.
56' J. Sims & D. Herman, supra note 535 at 898.
568 H. M. Morse, supra note 481 at 1230 ff.
88
A more serious question is whether remedies themselves distort competition. The benefici
ary o f a conveyance of competitive power , no matter whether tangible o r intangible, always
receives a basically undeserved advantage. For instance, Rhone-Poulenc Rorer S. A. was not
capable of developing a gene therapy-based cancer treatment by itself; hence the license given
by Novartis boosted its competitiveness. O f course, royalties were to be paid in return, but it
remains questionable whether they reflected the real value o f the license to the licensee, given
the uncertainty as to whether Novartis would have agreed to license its intellectual property7 at
all.36 This effect becomes problematic if the slight tendency7 to divest to U.S. firms turns more
manifest. Although this progress is not yret sufficiently manifest to call merger review severely
into question, it illustrates well the paradox o f competition law, i. e. trying to preserve competi
tion by interfering with the free play of the market forces.
II . T h e T r e a t m e n t O f J o i n t V e n t u r e s
In U.S. antitrust law joint ventures profit from a special treatment reflecting well the quan
dary between promoting competitiveness and maintaining competition. The term joint ven
ture is not defined comprehensively.50 In its 1988 Guidelines for International Operations the
DOJ referred to a joint venture as essentially any collaborative effort among firms, short o f a
merger, with respect to R&D, production, distribution and/or marketing o f products and serv
ices.5 1The 1999 Joint Venture Guidelines define a joint venture as comprised in the notion o f
collaboration as a set of one or more agreements, other than merger agreements, between or
among competitors to engage in economic activity7, and the economic activity7 resulting there
from.5 2 However, some joint ventures can reasonably be classified as mergers and many have
been subject to merger review. Joint ventures are generally subject to legal review under Section
7 Clayton Act as well as Section 1 o f the Sherman Act and Section 5 FTC Act.5 3 Due to their
potential to enhance efficiencies, they enjoy in principle an examination under the rule-of-
569
Another example, albeit not related to merger review is the United States v. Microsoft. Inc., Civ. N'o. 98-1232,
Complaint o f May 18th, 1998 at para. 2 (e) (i) where the relief sought was barring Microsoft, Inc. from selling
its operating system Windows with an included web browser, unless it also includes the most current version
o f the Netscape Internet browser.
5" Gregory J. Werden, .Antitrust Analysis o f Joint Ventures (1998) 66 .Antitrust L. J. 701 at 701; Addamax Corp.
v. Open Software Foundation, Inc. 152 F.3d 40, 50 fn. 3 (1 Cir. 1998).
5" U.S. Department o f Justice, Antitrust Erforcement Guidelinesfo r International Operations. 4 Trade Reg. Rep. (CCH)
U 13019 (1988), sec. 3.4 [hereinafter 1988 Internationa] Operations Guidelines].
572 1999 Joint Venture Guidelines, supra note 541 sec. 1; an exception is made for collaborations that last longer
than 10 years.
s'3 15 U.S.C.S. 1 (1991); Michael S. McFalls, The Role .And .Assessment O f Classical Market Power In Joint
Venture Analysis (1998) 66 Antitrust L. J. 651 at 653.
89
reason standard; some joint ventures are, however, per-se illegal.5 4 Even though their assess
ment overlaps only partly with merger review, some features are o f particular interest for the
examination of the influence of transnationalization on U.S. antitrust law.5 5
Export joint ventures can, by a decision o f the FTC, the DOJ, or the Department o f Com
merce (DOC), be exempted from the application of U.S. antitrust laws.56 The only prerequisite
to such exemption is that the joint venture does not distort competition within the U.S. or jeop
ardize the export activities o f a competing enterprise. The preferential treatment o f export busi
nesses regardless of any consequences for competition outside the U.S. is certainly protection to
enhance the competitiveness o f U.S. industry and therefore, like the exemption o f export car
tels, the object of vast criticism. Another special rule exists for joint ventures whose business is
in the research and development. The National Research Cooperative and Production Act of
1993 (NRCPA) does not provide for a full-scale exemption as such for R&D and production
joint ventures but it is a distinct reflection o f the belief that efficiencies and innovation should
be encouraged.5 Notwithstanding the dimensions o f the restraints on the parties independent
acting, joint ventures within the scope o f the NRCPA are judged by a rule-of-reason standard.5 8
In addition, the NRCPA limits damages to actual damages3 9 - with regard to production joint
ventures under the condition that either the principal facilities are located in the U.S. or the
controlling persons are U.S. persons.580 On the surface, the justification for that strategy consists
in the relatively small loss o f independent decision-making for the parent entities. However, it
seems that at least as R&D joint ventures are concerned statutory leniency' is established to
5'-
1999 Joint Venture Guidelines, supra note 541 secs. 2, 3; M. S. McFalls, supra note 573 at 698. The threshold to
per se illegality is crossed if the only purpose o f the joint venture consists in a restriction o f competition, see e.g.
Timken Roller Bearing Co. v. United States, 341 U.S. 593, 597-98 (1951).
3'5 Joint venture analysis focuses less on the structural change expressed by an increase in market shares but
rather on the restraints on independent economic acting of the parents, see ibid. at 664 ff.
W'ebb-Pomcrenc-Aa. 15 L'.S.C.S. 62 (1995); Export Trading Co. A ct, 15 U.S.C.S. 4001-3, 4011-21 (1991).
5~ 15 L'.S.C.S. 4301-05 (1996). The scope o f the NRCPA encompasses businesses whose activities are:
(A) theoretical analysis, experimentation, or systematic study o f phenomena or observable facts,
(B) the development or testing o f basic engineering techniques,
(C) the extension o f investigative findings or theory o f scientific or technical nature into practical
appli
cation for experimental and demonstration purposes, including the experimental production and testing
o f models, prototypes, equipment, materials, and processes,
(D) the production o f a product, process, or service,
(E) the testing in connection with the production o f a product, process or service by such venture,
(F) the collection, exchange, and analysis or research or production information or
(G) any combination o f the purposes specified in subparagraphs (A), (B), (Q, (D), (E), and (F), and may in
clude the establishment and operation o f facilities for the conducting o f such a venture, the conducting
o f such a venture on a protected and proprietary basis, and the prosecuting o f applications for patents
and the granting o f licences for the results o f such venture (...).
578 ibid 4302
5-7 Section 4 Clayton Act, 15 L'.S.C.S. 15 (1991), normally allows a negatively affected competitor to sue for
treble damages.
90
favour increased international competitiveness since encroachments on the possible benefit o f

R&D joint ventures are deemed to retard innovation. Congress clearly intended primarily that
the U.S. economy benefit from more indulgent treatment o f joint ventures.581 While the exemp
tion o f export joint ventures and cartels has for a long time been under attack as a blundy pro
tectionist measure, and an expansion o f this practice is not to be expected, the perspective on
joint ventures is different. With the strong enhancement o f innovation as decisive for competi
tiveness, it is not unthinkable that R&D-related mergers will also be regulated by a special provi
sion with more lenient standards.
I I I . I n d u s t r ia l P o l ic y
1.
I n d u s t r i a l P o l i c y i n T h e U .S. I n G e n e r a l
In the examined context, the question arises as to whether in the U.S. there exists a broader
concept of supporting the domestic economy, comparable to the industrial policy approach
implemented by the EU, and surpassing a mere leniency in merger enforcement. Industrial
policy is a term that was established to designate selected aid to the economy at the expense o f
competition. It is not clearly defined, and a variety o f different, sometimes contradictory,
meanings are conferred to it.582
Industrial policy' mosdy targets convergence points where the interests o f employers and
employees meet. Therefore, it always refers to a particular industrial sector.5*3 Two extreme
methods of industrial policy' have crystallized, the first one aiming at propping up old indus
tries like coal and steel, thereby mitigating the effects of structural changes (British model), the
second one specifically supporting future-orientated high-tech industries, resulting in an accel
eration o f structural developments (Japanese model).5*4 Note, however, that industrial policy
always changes the process of resource allocation that would prevail without i t 5*3
580
581
582
583
585
15 U.S.C.S. 4306 (1996).

Derek Devgun, Crossborder Joint Ventures: A Survey O f International Antitrust Considerations (1996) 21
Vi'MLR 681 (publication page references not available).
Ellis Krauss & Simon Reich, Ideology, interests, and the American executive: toward a theory o f foreign
competition and manufacturing trade policy (1992) 46 Int.l. Org. 857 at 858.
Murray L. Weidenbaum, Business, Government, A n d The Public, 4* ed. (Englewood Cliffs: Prentice Hall, 1990) at
243; G. Wilson, supra note 154 at 60: Industrial poliq can range from the mere provision o f a regulatory
framework for market forces to unfold relatively unhindered (horizontal industrial policy), to a detailed plan
ning o f the economic process involving die control of resources and direct intervention (sectoral industrial
policy).
G. Wilson, supra note 154 at 252.
Chris Hewitt, Enhancing International Compennveness: Structural Impediments To An Industrial Policy For
The United States" (1993) 25 L. & Poly Intl. Bus. 257 at 258.
91
Society in the U.S. does in principle consent to leaving the economy to the free play o f
market forces.586 A planification or economic steering following the French or Japanese
example is incompatible with the U.S. laissez faire tradition and the polvarchic social struc
ture. American industrial policy* takes a punctual character rather than that o f a coherent or
comprehensive strategy.58 Despite this, the importance o f strategically motivated influence on
the economy has increased over the last decades and a continuance of this process is to be ex
pected. The most important justification for that influence is the need to promote the competi
tiveness o f the U.S. industry.388 Competitiveness is perceived to be threatened through the
penetration o f the U.S. market by foreign competitors allegedly made possible by large industrial
policy programs in their respective home countries.589
An attempt at a more scientific explanation is made by the theory o f imperfect competi

tion. It contends that competition is not in itself capable o f generating all socially desirable
consequences.590 According to that opinion, free competition leads to a variety o f externalities591
and spillovers592, and administrative intervention is needed in order to bring these unwelcome
phenomena to a halt593 It is also alleged that market forces are not able to identify winnerindustries, i. e. sectors that will expand in the future and obtain high revenues, at a sufficient
speed. Again, intervention is required to show the economy the way.594
The absence o f a comprehensive scheme o f industrial policy in the U.S. reveals the charac
ter of a collection o f ad-hoc decisions.595 Matching this, the competence to implement measures
586 G. Wilson, supra note 154 at 40.

58' E. Kxauss & S. Reich, supra note 582 at 858; Stephen S. Cohen & John Zysman, Manufacturing Matters: The Myth
O f The Post-Industnal Economy (New York: Basic Books, 1987) at 218; C. Hewitt, supra note 585 at 262.
588 S. S. Cohen & J. Zysman, supra note 587 at 203; D. Snyder, supra note 438 at 135-37.
589 M. Weidenbaum, supra note 583 at 246; Dan Bertozzi, Business, Government, A nd Public Polity: Concepts A n d Prac
tices, 4th ed. (Englewood Cliffs; Prentice Hall, 1990) at 208; C. Hewitt, supra note 583 at 269.
590 S. S. Cohen & J. Zysman, supra note 587 at 203.
591 Externalities are positive or negative effects unintentionallyimposed onsomeone withoutpayment or com
pensation, P. A. Samuelson & \\. D. Nordhaus, supra note 75 at 972.
59: Spillover refers to the phenomenon that the cost o f a product do not reflect the actual marginal cost o f a
product because the firm premeditatedly uses efforts o f other economic actors without giving anything in re
turn (free-nder-problem ;, Paul S. Dempsey, Market Failure And Regulatory Failure -5s Catalysts For Politi
cal Change: The Choice Between Imperfect Regulation And Imperfect Competition (1989) 46 Wash. & Lee
L. Rev. 1 at 18.
593 Nathan A. Adams, Monkey See, Monkey Do; Imitating japans Industrial Policy In The United States
(1996) 31 Tex. Intl. L. J. 527at 548.
59,1 ibid. at 547; M. Weidenbaum, supra note 583 at 261.
595 M. Weidenbaum, supra note 583 at 259; C. Hewitt, supra note 585 at 262. For instance, the ReaganAdmini
stration published a plan in 1987 which illustrates the selectivity o f industrial policy measures in the U.S.:
1. U.S. S 4.4 billion for research on superconducting supercollider,
92
o f industrial policy for different sectors is conferred on different authorities. For example in
1992 the Technical Administration (TA), whose task it is to identify supportable sectors of the
high-tech industry, was created as a part of the D O C.596 Four years later the Advanced Tech
nology Program was accomplished to ensure the financing o f the sectors detected by the TA.59
The importance attached to this program is elucidated by the volume o f its budget which in
creased from U.S. S 29.7 to 42.9 billion within the last eight years.598
Besides this, there are voices that support the implementation o f an industrial policy on a
broad basis. It is argued that the economy must be understood as a cycle consisting o f several
phases: creating, investing, and marketing.599 If industrial policy is to have the slightest success it
has to aim at all the cycles elements encompassing measures such as tax incentives and meas
ures to deter foreign investment in the U.S.600 It is suggested that the U.S. should take an ag
gressive stance to protect its national interests a term that refers to the pursuit o f a strict
method o f reciprocity with regard to political and economic practices that harm U.S. econ
omy.601 Although political interference with market forces has increased since governmental
power was transferred to the Democrats in the early 1990s, such an interventionist approach
only has a very slight chance of realization.
2.
I n d u s t r ia l P o l ic y A n d M e r g e r R e v ie w
Absent a comprehensive industrial policy, one should ask whether there is the attempt to
implement a merger-review-specific industrial policy7. As mentioned above, international com
petitiveness o f the U.S. economy is taken into account when the Agencies make use o f their
discretionary leeway. A farther reaching, systematic induction of an industrial policy model is,
however, not detectable. Nevertheless, the incorporation o f international competitiveness as a
permanent component o f merger review has some support.
59t
59
598
599
600
601
2. U.S. S 3 billiontor theOrient Expressspacecraft,

3. U.S. S 1.7 billionfor a strategy tosupport U.S. computer and software industry.
The Technical Administration consists o f the Nationi Institute o f Standards and Technology (NIST) and the
Office o f Technological Policy (OTP).
Omnibus Trade A n d Compatibleness A ct of 1988. Pub. L. N o. 100-418,102 Stat. 1107.
Office o f Management and Budget, Budget of the U S . Government: Fiscal Year 2001, Chart 5-1, online:
<http://www.access.gpo.gov/usbudget/fy2001/maindown.htm> (date accessed: Aug. 20th, 2000).
M. Maibach, supra note 194 at 24.
ibid at 24-26.
ibid at 28.
93
Ia these premises, the incorporation o f a distressed industry defense has been suggested,
available for firms on d e clining markets and allowing for the approval o f principally anticom
petitive mergers for the reason o f efficacy improvements.602 For justification, supporters point
to the above-average efficiency generating potential o f such firms.603 The decisive element o f the
defense as propounded is that it is obtainable bv firms that do not face the threat o f immediate
bancruptcy, as required for a successful invoking o f the failing firm defense, and that it includes
the possible reference to a very- broad range o f efficiencies such as tax advantages or improve
ments in the management.604 The newspaper industry enjoys the existence o f a similar defense
established by the Newspaper Preservation Act605 permitting to invoke a probable danger of
financial failure. The backers o f this proposal advocate its expansion to cover the entire economy. The possible objections o f competition- or consumer-harming effects are countered by
the argument that harms would most likely occur only rarely.606 In order to limit the threat to
competition it is suggested that the scope o f this defense be confined to moderately concentrated markets.60 According to this proposal, the distressed industry defense should be supple
mented by a research and development defense that takes account o f the fact that research
projects require immense financial and human resources which can only be deployed by a com
bined entity.60
As to the recognition of an industrial policy defense that allows the reference to non
competition results like increased wages or improved environmental protection, the picture is
heterogeneous. There are suggestions indicating that the recognition o f such a defense would be
feasible.600 The fixation of U.S. antitrust law on market power is labeled as an outdated perspective, and the advocates o f this approach point to other nations, most o f all the EU, which
allegedlv take into account all kinds o f non-competition-related aspects.610 However, this solu
602
603
604
605
600
^
608
609
610
Proposals, supra note 173 at 227.

ibid. at 237.
ibid. at 230-31, 239.
15 L'.S.C.S. 1801-1804 (1996).
Proposals, supra note 173 at 241.
ibid. at 238.
ibid. at 244.
B. D. Garland & R. Levary, supra note 198 at 55.
ibid. at 53-54. This contention is, however, not accurate. Although European merger control shows an in
creased openness for a variety o f factors based on the pluralism o f objectives set forth in the Arts. 2, 3 o f the
Treaty Establishing the European Economic Community, Mar. 25*, 1957, as amended by the Single European Act,
[1987] O. J. L 169/1, [1987] 2 CMLR 741, as amended by the Treaty on European Union, Feb. 7*, 1992, [1992]
O. J. C 224/01, [1992] 1 CMLR 719, even die Commission does not support the relevance o f entirely remote
aspects such as improvement o f cultural life. A different example is furnished by the legislation o f Australia
whose merger control law expressly recognizes a public benefit defense, Australian Trade Practices A ct of 1974,
T AL'STL ACTS P. 90 (6) (1979).
94
tion is more frequently rejected as it would severely impede the operability o f merger review,
since the effects of non-competition-related quality are nearly immeasurable, as well as causality
between their existence and a particular merger is impossible to track.611
Thus, it can be seen that there are proposals to introduce industrial polity to a lesser or
greater extent into U.S. merger review. Notwithstanding this fact, an express recognition o f in
dustrial polity' measures has not yet taken place.612 The only exception where the Agencies have
acknowledged the relevance o f international competitiveness as an integral part o f the merger
review system concerns innovation markets - an approach that is still in flux and has not yet
been tested in litigation.613
612
Proposals, supra note 173 at 246-48.

O f course public choice theorists suggest that the whole antitrust enforcement is one big industrial policy
depending on whose interests prevail, VT. H. Page, supra note 93 at 9.
In 1987 there was the attempt to change Section 7 Clayton Act to include the possibility o f refering to com
petitiveness boosted by the generation o f efficiencies. Import-injured industries were suggested to enjoy an
exemption from the antitrust provisions for a period o f up to five years. This proposal was ultimately rejected
by Congress, see D. Bertozzi, supra note 589 at 215.
95
C h a p t e r 5 - I n t e r n a t io n a l R e g im e
The transnationalization and its corollaries - the flourishing o f cross-border mergers and
the tendency toward larger enterprises increasingly produce situations o f competing interfer
ence by multiple competition authorities.
A.
E x t r a t e r r it o r ia l A p p l ic a t io n O f S e c t io n 7 C l a y t o n A c t
The expansion o f the scope o f antitrust law to M & As entirely consummated abroad is
usually termed extraterritorial application.614 The question whether such structural changes are
within or beyond the reach o f U.S. jurisdiction has been subject to an intensive debate for a
long time.
I.
S c o p e A n d L im it a t io n s
1.
T h e E f f e c t s D o c t r in e
Section 7 o f the Clayton Act solely prohibits mergers between persons engaged in com
merce that substantially to lessen competition in any section o f the country. It does not
contain any restriction to undertakings organized under U.S. law or possessing assets in the
U.S.615 Foreign nationality not barring the application o f Section 7 Clayton Act, U.S. law even
tolerates the violation o f international law unless the infringement o f a self-executing interna
tional treaty, concluded after the enactment o f the relevant U.S. statute, occurs.616 Absent such a
treat}' the extraterritorial application o f Section 7 Clayton Act is, in principle, limitless.61
U.S. jurisprudence had until the 1940s always been reluctant to apply U.S. antitrust lawr extraterritorially.618 This changed in 1945 when the Court o f Appeal o f the Second Circuit held in
its decision Aluminum Corp. ofAmerica v. United States'1'1, that U.S. antitrust law is applicable to all
614 Jennifer Quinn, Sherman Gets Judicial Authority To Global: Extraterritorial Jurisdictional Reach O f U.S.
Antitrust Laws Are Expanded (1998) 32 J. Mar. L. Rev. 141 at 141.
615 Joseph P. Griffin, Extraterritoriality In U.S. .And EU Antitrust Enforcement (1999) 67 Antitrust L. J. 159 at
169.
6,6 see .American Law Institute, Restatement (Third) of Foreign Relations Lau of the United States (Philadelphia: American
Law Institute, 1987) s. 115(l)(a); John H. Jackson, Status o f Treaties in Domestic Legal Svstems: A Policy
.Analysis (1992) 86 -Am. J. Intl L. 310 at 320.
61' Aubry D. Smith, Bringing Down Trade Barriers - .An .Assessment O f The United States Unilateral Options:
Section 301 O f The 1974 Trade Act And Extraterritorial Application O f U.S. Antitrust Law (1994) 16 Mich.
J. Intl. L. 241 at 249.
618 see e. g. American Banana Co. v. United Fruit Co., 213 U.S. 347, 511 (1909): [t]he general and almost universal
rule is that the character o f an act as lawful or unlawful must be determined wholly by the law o f the country
where the act is done.
619 148 F.2d 416, 443 (2nd Cir. 1945).
96
foreign enterprises and their conduct if effects on American exporters are noticeable. The deci
sion marked the turn o f U.S. jurisprudence to the effects doctrine, a principle of public inter
national law that justifies the application o f a states law on conduct abroad by effects caused
within that states territory.620 The notion o f effects has subsequently never been clarified
conclusively by U.S. jurisprudence.621 Although on the surface confining extraterritorial applica
bility, this decision gave rise to a belief that practically all situations having an international as
pect were within the reach of U.S. law622, which provoked reactions ranging from diplomatic
protests to the enactment o f blocking statutes.623
Statutory force was granted to the effects doctrine when Congress enacted the Foreign
Trade Antitrust Improvement Act (FTALA).624 This Act provides the applicability o f U.S. anti
trust law to all foreign firms that do not directly export into the U.S. and affect U.S. economy byother means than im port As a condition for such extraterritorial application, the Act sets forth
that there must be direct, substantial, and reasonably foreseeable effects on (1) U.S. domestic
trade or commerce, (2) U.S. import trade or commerce, or (3) the U.S. export trade or com
merce o f a person engaged in such trade or commerce in the U.S.625 However, by merely con
firming judicial doctrine that repercussions on the American economy must not be entirely re
mote in order to justify- extraterritorial application, the FTAIA is no outstanding example of
regulatory clarification.626
2.
R e s t r ic t io n s O f T h e E f f e c t s D o c t r in e
For the purposes o f elaborating more workable principles, the courts developed with oc
casional reference to the FTAIAs implication o f reasonableness a limitation model, the
comity- test62 or reasonableness test.628 Comity is a principle often cited in U.S. jurispru
620
62!
622
623
434
625
626
6r
628
Malcolm N. Shaw, International Law, 3rd ed. (Cambridge: Grotius, 1991) at 423. The effects doctrine itself roots
in the principle o f objective territoriality that grants jurisdiction over all conduct or events that are sufficiendy
linked to results within a states territory. The qualityo f a sufficient link is, however, disputed.
D. Devgun, supra note 581 (publication page references not available).
J. P. Griffin, supra note 615 at 160.
The most prominent example is certainly the British Protection of Trading Interests A ct 1980 (U.K.), 1980, ch. 11.
15 U.S.C.S. 6a (1982), 45 (a) (3) (1991).
15 U.S.C.S. 6a (A) (1) (1982).
Barry E. Hawk, International Antitrust Policy and the 1982 Acts: The Continuing Need for Reassessment
(1982) 51 Fordham L. Rev. 201at 222. Given that the formulation o f the Act ressembles to the one used by
the courts it seems probable that Congress did not have the intention to facilitate the assessment o f the re
moteness o f effects but rather to leave that to jurisprudential practice.
D. Devgun, supra note 581 (publication page references not available).
M. N. Shaw, supra note 620 at 424.
97
dence in order to limit the jurisdiction of a state.629 In essence it entails that sovereigns are to use
their discretion when exercising jurisdiction extraterritorially in mutual respect for each
others legislative, executive, and judicial acts.610 Being voluntary in character, the cornin princi
ple does not oblige a state to abstain from applying its laws to conduct abroad having balanced
domestic and foreign governmental or state interests.
In a landmark decision, the Court o f Appeal o f the Ninth Circuit held that the previous
model had displayed imperfections.611 The judges devised a list o f factors to be taken into ac
count when gauging extraterritorial applicability o f U.S. antitrust law.612 This catalogue was subsequendy accepted611, modified614, or rejected613 by other courts, but could eventually enjoy
broad acceptance.616 In 1993, then, the U.S. Supreme Court gave its most recent decision with
regard to the problem.61 Unfortunately, it missed the opportunity to setde the question o f lim
iting extraterritorial application by concentrating on a different issue.618 The court held with a
five-to-four-vote majority that beyond any relevance o f factors similar to those listed in Timberlane Lumber Co. v. Bank o fAmerica N T & S A ., extraterritorial application depended on the result
o f a second analytical step the purpose o f which it is to identify whether there is a true and
direct conflict with the interests o f another state.619 The possibly unintended result o f this deci
629 Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287, 1296 (3rd Cir. 1979).
630 Ian Brownline, Principles of Public International Law, 4* ed. (Oxford: Oxford University Press, 1990) at 29.
631 Timberlane Lumber Co. v. Bank ofAmerica N T e~ S A ., 549 F.2d 597, 611-12 (9th Cir. 1976): (The effects doc
trine is] incomplete because it fails to consider other nations interests. Nor does it expressly take into account
the full nature o f the relationship between die actors and this country.
632 These factors include (1) the degree o f conflict with foreign law or foreign policy, (2) the nationality and civil
dunes o f the parties and the location o f the business activity, (3) the relation between the effects o f the at
tacked behaviour in the U.S. and abroad, (4) the existence o f an intention to influence commerce and trade
between the U.S. and foreign nations, (5) die possibility to enforce any decision, (6) the foreseeability o f the
consequences, (7) the relations between the actions in the U.S. and abroad, ibid. at 612-16.
633 Montreal Trading L td v. A A IA X , Inc., 661 F.2d 864, 869 (10th Cir. 1981); Industrial Investment Development Corp. v.
Mitsui e~ Co., L td , 671 F.2d 876, 885 (5th Cir. 1982).
634 Mannington Mills, Inc. v. Congoleum Corp., supra note 629 at 1294-95.
635 N at 'L Bank of Canada v. Interbank Card Ass. and Bank of Montreal, 666 F.2d 6, 8 (2nd Cir. 1981); Laker Airways v.
Sabena Belgium World Airlines, 731 F.2d 909, 921-55 (D. C. Cir. 1984).
636 see e. g. American Law Institute, supra note 616 sec. 403. Apart from the comitylimitationthere exist other
exceptions to U.S. antitrust jurisdiction: (1) general principles o f publicinternational lawlike the equality o f
states or the principle o f non-intervention; (2) agencies or instrumentalities o f a foreign state, Foreign Sovereign
Immunities A ct of 1976, 28 U.S.C.S. 1604 (1988); (3) U.S. courts deny jurisdiction over conduct which is the
act o f or compelled by a foreign sovereign, if this entails the necessity o f judging the legality o f the act, see e. g.
Banco National de Cuba v. Sabbatino, 376 U.S. 398, 423 (1964); Alfred Dunbill o f London v. Republic of Cuba, 425
U.S. 682 (1976); International Association, of Machinists v. Organisation of the Petroleum Exporting Countries, 649 F.2d
1354, 1358-59 (9th Cir. 1981)(Act o f State Doctrine). These exemptions, however, are o f negligible practical
relevance.
63' Hartford Fire Insurance Co. v. State <f California, 509 U.S. 764 (1993).
638 A. D. Smith, supra note 617 at 253.
639 Hartford Fire Insurance Co. v. State of California, supra note 637 at 798-99: As such a conflict is deemed, for in
stance, the necessary violation o f foreign law by compliance with U.S. law.
98
sion was a facilitation of extraterritorial application as the gist o f the analysis shifted to the exis
tence o f a true and direct conflict which can be found only in exceptional cases.640
II. T h e E n f o r c e m e n t P r a c t i c e O f F T C A n d DO J
The position o f FTC and DOJ was most recendv expressed in the 1995 Antitrust Enforce
ment Guidelines for Intemadonal Operations.641 The Guidelines restate that the Agencies will
apply Section 7 o f the Clayton Act to M & As that account for substantial U.S. sales and gener
ate direct, substantial, and reasonably foreseeable effects on U.S. domestic or import com
merce, thereby adopting the standard set out in the FTALA.642 Besides this, the Guidelines de
clare that the Agencies will take into account a variety o f comity-related aspects, matching to a
great extent the ones referred to by the courts.643 It is asserted that all the factors mentioned,
beyond the question of a conflict with foreign law or policy, are given equal weight644 which
seems at first sight to be in conflict with the position taken by the Supreme Court. Moreover,
FTC and DOJ are anxious to stress that they appreciate any form o f fruitful cooperation with
foreign antitrust authorities.64
Still, the Agencies approach to extraterritorial application o f Section 7 o f the Clayton Act is
far from being toothless. In the 1995 International Operations Guidelines, FTC and DOJ re
scinded the famous footnote 159 of the Guidelines 1988 version which required negative
effects of the transaction at issue on U.S. consumers as a condition for extraterritorial applica
tion. With this omission, U.S. exporters enjoy a more forceful antitrust shield as any merger
that merely hinders U.S. export activities or even commerce between individual states now justi
642
643
An indication that this was virtually the intention o f the court might be deduced from the fact that five out o f
nine judges declined to engage in interest balancing.
supra note 506. The 1995 International Operations Guidelines a joint endeavour of the Agencies replaced
their predecessor, the DOJs 1988 International Operations Guidelines, supra note 571.
1995 International Operations Guidelines, supra note 506 secs. 3.12, 3.14.
ibid. sec. 3.2: (1) the relative significance to the alleged violation o f conduct within the United States, as com
pared to conduct abroad; (2) the nationality o f the persons involved in or affected by the conduct. (3) die
presence or absence of a purpose to affect U.S. consumers, markets, or exporters; (4) the relative significance
and foreseeability o f the effects o f the conduct on the United States as compared to the effects abroad; (5) the
existence o f reasonable expectations that would be furthered or defeated by the action; (6) the degree o f con
flict with foreign law or articulated foreign economic policies; (7) the extent to which the enforcement activi
ties o f another country with respect to the same persons, including remedies resulting from those activities,
may be affected; and (8) the effectiveness of foreign enforcement as compared to U.S. enforcement action.
ibid
ibid secs. 1, 2.9, Illustrative Examples I, J; see above Chapter 5, B. II. 4 at 55 (in the matter o f Federal-Mogul Corp.
and Tc~N p.lc.J. This conception is at least in part supported by the International Antitrust Enforcement Assistance
A ct of 1994, 15 U.S.C.S. 6201-6212 (1994) which allows the Government to cooperate with foreign antitrust
authorities in many ways, particularly with regard to the exchange o f information.
99
fies an analysis under Section 7 Clayton Act.64In practice, despite the reference to an ample
director}- o f qualifying factors, the Agencies still vigorously enforce U.S. antitrust law abroad.64
III . P r o b l e m s
While apparendy on a sound and stable footing, extraterritorial application o f U.S. antitrust
law is not free from uncertainties. In one o f its early merger decisions the U.S. Supreme Court
observed that U.S. antitrust law aimed to protect competition not competitors.648 Nonethe
less, U.S. antitrust practice applies the relevant provisions extraterritorially if the conduct o f
foreign undertakings or changes in foreign market structures threaten to bar American exporters
from certain markets.64 The required effect on U.S. economy are the mere impediments to
American enterprises when entering markets abroad. The focus on current or anticipated mar
ket exclusion does not easily fit into the concept o f protecting consumers and ensuring an op
timized allocation of resources. In employing U.S. antitrust provisions to achieve market access
for American firms, an aggressive trade policy is substituted for the preservation of a competi
tive environment.630 Although the practical relevance o f this is arguably not overwhelming, it is a
perfect example o f instrumentalization o f antitrust provisions. The use o f U.S. antitrust law as a
can-opener also entails further risks. American competition law provides for ample possibili
ties o f private enforcement including the possibility to obtain treble damages - a feature that is
viewed suspiciously and rejected in the majority o f other legal systems.651 The prospect o f pri
vate litigation to gain market access under the cloak o f an antitrust violation does not appear
particularly attractive, and the legitimacy o f aggressive extraterritorial application to regulate a
market abroad so as to benefit the American economy seems to be doubtful, to say the least.
Another, more systematic, dilemma unfolds with regard to efficiencies generated by M &
As occurring abroad. In sec. 2 of their 1995 International Operations Guidelines, the Agencies
commit themselves to a non-discriminatory application o f U.S. law to foreign enterprises. How
ever, how are they going to assess efficiencies o f a merger o f foreign firms if economies other
646 see also 1995 International Operations Guidelines, supra note 506 sec. 3.11.
64 J. P. Griffin, supra note 615 at 168; see above Chapter 3, B. II. at 78 and below Appendix, Table 3 at XXXIV.
648 Brvwn Shoe v. United States, supra note 218 at 320.
649 As an example may serve United States v. Pillungton p.Lc.,Civil Action Xo. 94-345,Proposed Final Judgement
And Competitive Impact Statement 59 F.R. 30604 (N. D.Ariz. July 14Ih, 1994). Thedefendant, the worlds
leading manufacturer o f float-glass, had licensed its technology to U.S. enterprises. Incorporated in the license
agreement was a clause blocking the licensees from erecting facilities outside a certain territory.
651 15 U.S.C.S. 15 (1991).
100
than the U.S. profit from these synergies? To neglect them would infringe the principle o f non
discrimination, whereas taking them fully into account might collide with the objective of pre
venting harm to U.S. consumers.652 The Agencies reflections lack consideration in that respect,
but it would not be a great surprise if an assessment on a case-bv-case basis was more likely not
to favor foreign efficiencies.
The reliance on direct, substantial, and reasonably foreseeable effects can not, from an in
ternational law perspective, be criticized.653 Still, the practice o f extraterritorial enforcement
comprises the application o f the pre-merger notification rules o f the HSR-Act.654 Even though
the scope o f exemptions from the Act for foreign transactions is broader than for U.S. firms555
many are subject to cumbersome notification requirements.556 The Agencies place great empha
sis on compliance with the HSR provisions and react very sensitively to any infringement.65 By
what means they plan to render this practice compatible with their resources, already strained to
the breaking point, remains their secret55* In short, in extraterritorial application has a great
potential for instrumentalization, and therefore self-restraint is to be highly recommended.
B. T h e I n t e r n a t io n a l iz a t io n O f C o m p e t i t i o n P o l ic y
The extraterritorial application of competition law is an excellent example o f what frictions

the emergence o f transnationalized market and firm structures may cause. The coordination and
harmonization o f competition laws is lagging far behind the internationalization o f markets and
enterprises.659 If the current system of nationally or regionally (EU) confined antitrust law sys
tems is maintained unaltered, an inflation of conflicts is inevitable.660 Viewed in the long term,
65: Section 7 Clayton itself, with its reference to a substantial lessening o f compention, requires a rule-of-reason
anall'sis encompassing pro-competitive effects, J. Quinn, supra note 614.
654 1995 Intemauonal Operations Guidelines, supra note 506 sec. 2.4.
655 For instance, an exemption exists for acquisitions by foreign persons if (i) the acquisition is o f voting securities
o f a foreign issuer and would not confer control o f a U.S. issuer having annual net sales or total assets of S25
million or more, or o f any issuer with assets located in the United States having a book value o f S15 million or
more: or (ii) the acquired person is also a foreign person and the aggregate annual net sales o f the merging
tirms in or into the United States is less than SI 10 million and their aggregate total assets in the United States
are less than SI 10 million.
656 see above, Chapter 4, B. I. at 83.
65 In the matter o f Mahle GmbH; Mahle, Inc.; Leve GmbH; Leve, Inc., Proposed Consent Agreement o f March 7*,
1999, 62 F.R. 10566: Record Fine of U.S. S 5.6 million for non-compliance.
658 A. Fiebig, supra note 530 at 243.
659 M. E. Porter, supra note 189 at 619.
660 see Eleanor M. Fox, Competition Law and the Agenda for the VITO: Forging the Links o f Competition and
Trade (1995) 4 Pac. Rim L. & Poly.J. 1 at 8 [hereinafter WTO]; Eleanor M. Fox & Janusz A. Ordover,
The Harmonization o f Competition and Trade Law: The Case for Modest Linkages of Law and Limits to Pa
rochial State Action (1995) 19 World Competition L & Econ. Rev. 5 at 14-7.
101
an effective control o f multinationally operating businesses by single nations is doubtful.661 Be

sides, there is considerable pressure exerted by the business-community, as the coexistence of
many merger control regimes imposes the tedious and cost-intensive requirement of complying
with numerous regulations.662 In order to solve this dilemma a variety o f proposals are made.
I.
T h e H a r m o n iz a t io n A p p r o a c h
One suggestion is directed to a harmonization of the existing national laws.663 The decisive
element o f this approach is the perpetuation o f national law and national sovereignty. The dif
fering antitrust laws are not altered as a consequence o f external imposition but rather as the
outcome o f a process o f mutual adaptation and convergence.664 For these purposes various
tools are to be employed, ranging from the informal exchange o f opinions on a regular basis, to
the establishment of organized workshops, to the elim in a tio n o f barriers to information flow.665
The supporters of this concept assume that the result o f the combined mechanism would
sooner or later be a comprehensive conformity of substantive, procedural, and enforcement
principles amounting to the removal o f the most troublesome frictions.666
II. T h e I n t e r n a t io n a l i z a t io n O f A n t it r u s t La w
In contrast, many commentators prefer the establishment o f international antitrust rules to

be enforced by an independent authority.66 This general course is taken by multiple contriv
ances which vary to changing degrees.
662
662
664
666
66 '
G. Wilson, supra note 134 at 176; A. Tita, supra note 146 at 48; Spencer Weber Waller, The Internationaliza
tion O f Antitrust Enforcement" (1997) 77 B. L'. L. Rev. 343 at 376 [hereinafter Internationalization], points
to the difficulties enforcement authorities face when trying to win an international antitrust case: service o f
process; personal jurisdiction; battles over discovery, admissibility o f evidence, and availability o f witnesses;
special Internationa] defenses; and the difficulty o f fashioning meaningful relief.
A. Ftebig, supra note 530 at 234.
Eleanor M. Fox, Toward World Antitrust And Market Access (1997) 91 Am. J. Intl. L. 1 at 13 [hereinafter
World Antitrust]; K_ Luz, supra note 298 at 173; James F. Rill & Virginia R. Metallo, The Next Step: Con
vergence o f Procedure and Enforcement [1992] Fordham Corp. L. Inst. 15 at 31.
World Antitrust, supra note 663 at 13: There is the differentiation between loose harmonization, that is the
harmonization through cross-fertilization or tight harmonization, i. e. coaxing the national laws into (near)
identity.
K. Luz, supra note 298 at 174.
T. R. Overton, supra note 485 at 313.
A. Tita, supra note 146 at 48; W TO , supra note 660 at 11-12.
102
1.
T h e W TO P r o p o s a l s
The WTO was established in 1995 as the successor o f the GATT as implementation o f the
decisions made in the Uruguay Round o f multilateral trade negotiations.648 Even though not
primarily designed to address competition-related problems, the W TO agreements are often
seen as the first step toward the creation o f international antitrust rules.660 The limited extent of
antitrust-related provisions in the WTO agreements resulted in a call for the inclusion o f a wider
range of competition rules.6,0
In 1992 the Rt. Hon. Sir Leon Brittan uttered an appeal to the world to incorporate anti
trust provisions into the GATT system671 which has to date remained unimplemented but not
ignored.6,2 The proposals for the creation of an international antitrust regime within the
GATT/W TO have in recent years been boosted by transnationalization, thereby shifting the
traditional focus from cartel behaviour to structural restraints.673 It is argued that an interna
tional merger control regime under the authority o f a world agency would m in im iz e the dev
astating expenses caused by overlapping jurisdictions and the need to comply with a variety of
procedural and substantive rules in the case of cross-border transactions.6'4 The W TO is seen as
the most comprehensive organization o f nations and, other than the United Nations, experi
enced in questions o f international trade and competition as well as dispute settlement.6 5 As a
669
60
6,1
6:
673
64
6'5
The GATT (General Agreement on Tariffs and Trade, Oct. 30th, 1947, 58 U.N.T.S. 187, Can. T.S. 1947 No. 27)
again, had its origins in the Haiana Charterfor an International Trade Organisation, March 24th, 1948, UN Doc.
E/C.2/78, reprinted in UN Doc. ICITO/114 (1948) which never was adopted. Unlike its predecessor the
GATT lacked any antitrust provisions. Subsequent attempts to incorporate competition agreements failed for
the impossibility to reach a consensus. The WTO embodies a number o f agreements, such as the GATT 1994,
the General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects o f Intel
lectual Property Rights (TRIPS).
Natalya Yacheistova, The International Competition Regulation [1994] 18:1 World Competition 99 at 10406.
O f course, there exists the Set of Principles and Voilesfor the Control of Restrictive Business Practices, G A Res., 35th
Sess., UN Doc. T D /R B P/10 (1980) with relatively detailed recommendations concerning anticompetitive
mergers but lacking any enforceability it has so far not gained any practical significance.
Rt. Hon. Sir Leon Brittan, A Framework for International Competition, Address To The W'orld Economic
Forum on Feb. 3nd, 1992 cited in Edwin A. Vermulst, A European Practitioners View o f the GATT System:
Should Competition Law Violations Distorting International Trade Be Subject to GATT Panels? [1992] 16:3
World Competition 5 at 6.
B. Crisman & M. S. Barnett, supra note 89 at 420-21; Emst-Ulrich Petersmann, International Competition
Rules for the GATT-MTO World Trade and Legal System [1993] 27:6 J. World Trade 35 ft., 64 ff.
This development is to a good portion attributable to international conflicts such as the Boeing/McDonnellDouglas merger. Currently, the scope o f the WTO provisions is restricted to situations involving governmen
tal or hybrid governmental/private action. Anticompetitive actions by private parties solely cannot be ad
dressed; N. Yacheistova, supra note 669 at 108.
Michael Reynolds, EU and U.S. Merger Control Procedural Harmonisation [1999] Poly. Directions for
Global Merger Rev. 109 at 109; Frederic Jenny, International Merger Control" [1999] Poly. Directions for
Global Merger Rev. 91 at 91.
Annex 2 o f the WTO Agreement: Understanding on Rules and Procedures Governing the Settlement o f Dis
putes (DSU). Member States have the right to complain under the DSU against an alleged violation o f another
103
consequence o f tie W TOs global character, developing and transient economies, e. g. the
countries o f Eastern Central and Eastern Europe, could from the start be integrated and unnec
essary diversions avoided.6,6 N ot surprisingly, this idea is favored by most o f the Third and Sec
ond World countries. O f course, the proposal for a WTO-based international competition law is
not unanimously accepted.
There are manifold suggestions o f how antitrust provisions should be incorporated into the
W TOs framework. A minimalist approach, contrived by Andre Fiebig calls for the establish
ment of a WTO Pre-merger Office whose task merely consists of identifying those jurisdic
tions not affected by an international merger.6 The sensitivity o f states in terms o f sovereignty
would doom to failure any concept that entails the transfer o f substantive power to a multina
tional agency. Parties to transactions that affect multiple jurisdictions shall have the option to
choose between a unified notification to be filed to the Premerger Office and the different noti
fication procedures of the states affected.678 The Premerger Office would not have any authority
to make a substantive decision.6711 In fact, the proposal intentionally limits the importance o f the
Premerger Office to competitively insignificant cases that do not justify the investment o f time
and financial resources in multiple notifications.680 Its only authority would consist in identifying
jurisdictions not affected; Member States would only have to abide by these decisions.
Furthermore, there are suggestions like the model proposed by Frederic M. Scherer.681 His
concept envisages the implementation o f a WTO-based antitrust regime stretched over the pe
riod of seven years. Within the first year an International Competition Policy Office (ICPO) is
to be established, possessing investigative and enforcement powers.682 In the following year
monopolies, single-nadon export and import cartels as well as cross-border operating cartels
must be registered with the ICPO683; by the third year, the competence o f administrating the
pre-merger notification o f all signatory states is concentrated in the ICPO which is, in return,
6"6
6~
678
b"^
680
681
Member State o f its duties (violation complaint), application o f measures by the Member State (non-violation
complaint), or the existence o f another situation (situation complaint) if the attaiment o f the ViTOs objec
tives are impeded or rights o f a Member State impaired or nullified. Consultations having failed, the dispute
can be brought before a panel or to arbritation. Panel decisions may be appealed before the Appelate Body.
A. Fiebig, supra note 530.
ibid. at 247.
tbid at 249.
ibid. at 247.
ibid at 249.
Fredenc M. Scherer, Competition Policies for an Integrated W'orid Economy (Washington D . C.: The Brookings In
stitution, 1994) at 91-97.
682 ibid
104
responsible for the distribution o f information to all interested national authorities. After the
seventh year, the ICPO will accept complaints from signatory states referring to anticompetitive
conductive or structural occurrences, will direct investigations, and will recommend solutions to
the national authorities.684 Where the national authorities do not react appropriately, the WTO
may authorize sanctions. The proposal is meant to take the necessity o f balancing practical
needs and the respect for national sovereignty into account. Consequendy, it foregoes the es
tablishment of a supranational authority competent for substantive decisions as well as the im
plementation of a unified international antitrust law.685
At the other end o f the spectrum there are finally those concepts that suggest the estab
lishment o f a complete range o f representative, administrative, and intergovernmental bodies
under the surveillance o f a judicial one, to which the unique power o f enacting and enforcing
antitrust provisions is conferred.686 These suggestions, however, generally are more visionally
than concrete and not detailed in character.
2.
T h e OECD P r o p o s a ls
A not dissimilar proposal recommends the creation o f an international antitrust law and an
enforcing body on the platform o f the OECD. In the period following Wodd War II the
OECD has often proved to be a forum for fruitful discussion of economic problems.68 For
instance, in 1994 the OECD adopted its Guidelines for Muldnadonal Enterprises688 in order to
ensure the operation o f multinational enterprises in accord with the competition provisions o f
the Member States.689 Albeit not o f binding character, the Guidelines for Multinational Enter
prises enjoy considerable influence, partially because the Member States want to enhance their
significance.
On the grounds that the OECD Members have reached a sufficient level o f convergence in
values and economic development, it is hoped that fruitful negotiations can take place on a
ibid.
ibid
ibid
689
A. Tita, supra note 146 at 53.

Internationalization, supra note 661 at 361.
OECD, Guidelinesfor Multinational Enterprises (1994) (Paris: OECD, 1994).
The OECD did not intend to push toward a harmonization o f die different competition laws. The Guidelines
encourage multinational enterprises to abide by the Member States competition laws and to refrain from par
taking in anticompetitive actions.
105
topic as intertwined with policy considerations as is competition law. An O EC D role as the

nucleus for any international regime would exclude all non-developed countries, but this is apparendy regarded as the price for more realistic prospects of implementation.690 Without show
ing particular enthusiasm for the internationalization of antitrust law, the O EC D solution is
strongly favored by the U.S. which, on the other hand, vigorously rejects any WTO involve-
III. T h e D r a f t I n t e r n a t i o n a l A n t i t r u s t C o d e
Perhaps the most ambitious advance in the direction of an international competition regime
so far has been the Draft International Antitrust Code (DIAQ presented in July 1993 at the
Munich Max-Planck Institute.692 Although it rejects the creation o f a substantive international
law as impracticable, it is the most detailed suggestion yet for an international antitrust regime
which is to be embedded in the framework of the GATT/WTO. Addressing the entire field o f
antitrust law, the proposal rests with regard to merger renew on a handful o f basic ideas.
Art. 3 sec. 1 (a) sets out the principle that the DIAC shall only cover M & As o f a transna
tional dimension, mergers of mere national character remaining exclusively in the jurisdiction o f
the nation concerned.693 Art. 8 sec. 1 further clarifies the scope o f the DIAC by defining the
term concentration a synonym for merger with reference to the acquisition o f control
by a person over an undertaking.694 The jurisdiction o f a participating nation over a merger is
asserted by the effects doctrine incorporated in Art. 3 sec. 2, gearing to economic effects in its
territory or otherwise on its commerce.
Once the regime o f the DIAC is pertinent to a merger, A rt 2 sec. 2 (b) provides for the ap
plication of domestic law to the transaction (national treatment) prohibiting any discrimination.
Notwithstanding the principal applicability of domestic law, A rt 11 sec. 1 DIAC requires the
participating nations to establish a minimum standard by prohibiting concentrations which cre
690
691
OECD, supra note 688 at 391.

ibid. at 378.
Printed in 64 Antitrust & Trade Reg. Rep. (BNA) No. 1628 (Aug. 16th, 1993) (Spec. Supp.) [hereinafter
DLAC].
In order to determine transnationality, -Art. 9 sec. 1 (a) sets thresholds either reached if the turnover o f the
parties involved accounts for at least 0.1% o f the GNP o f a nation affected, or if 90% o f the parties world
wide turnover is achieved outside the boundanes o f one affected nation.
The notion o f control encompasses the possibility o f exerting decisive influence on the acquired firm notwith
standing the means by which the exertion occurs.
106
ate or increase the power o f the parties involved to either separately or joindv (...) impede ef
fective competition in the relevant market.695 Apparendy, this standard requires proof o f a
greater anticompetitive effect than the one caused by mere cartel behaviour. The DIAC recog
nizes that merger review is in many countries subject to measures o f industrial policy which
generally lead to a higher level o f concentration. In order not to jeopardize its effectiveness by
allowing disputes between the participating nations, the DIAC is designed to concentrate on the
truly anticompetitive transactions.696
The national agency7 competent for merger review (termed National Antitrust Authorin')
is required to enforce the nations antitrust laws in accordance with the provisions o f the DIAC.
This authorin must be independent from the nations Government. It must also be independ
ent from the body that decides whether a merger should be approved for reasons o f over
whelming public interests.69 Art 10 outlines the procedural demands as to the review o f con
centrations. On the national level, a system o f pre-merger notification and a sufficient suspen
sion period are to be established. On the international level the DIAC contemplates the estab
lishment of two authorities: (1) the International Antitrust Authority, composed o f a President
appointed for a six-vear nonrenewable term and a twenty-member Council698; (2) an judicial
tribunal named the International Antitrust Panel whose members are appointed for a six-year,
once-renewable term.699 The International Antitrust Authority shall be given power to urge na
tional agencies to enforce the national antitrust law, as well as a right to sue all private parties
before the national courts, and a right to appeal against judicial antitrust decisions. Serving the
goal o f dispute resolution, the Antitrust Panel can be addressed by each participating nation, as
well as the Antitrust Authority if the nation or agencj is convinced that another participating
695 DIAC, supra note 692 art. 11 sec. 1 (b) also contains a list o f general factors to be taken into account by the
national authority: (1) the competitive structure o f all the markets concerned, including the actual or potential
competition from undertakings located either within or outside the territory o f the National Antitrust Author
ity: (2) the market position o f the undertakings concerned and their economic and financial power, the alter
natives available to suppliers and users, their access to supplies or markets, any legal or other barriers to entry
as well as supply and demand trends for the relevant goods and services.
696 ibid. art. 12 sec. 1 incorporates an express exception for anticompetitive mergers which can be approved if the
approval lies within an overwhelming public interest and does not unreasonably harm the legitimate interests
o f other affected parties. This exception, however, is to be restricted to very limited situations and generally
acknowledged criteria. It is suggested that the advantages must be merger-specific and bring about real pro
ductive efficiencies or technological progress. Furthermore, the harm to competition must be fully compen
sated.
69' ibid art. 12 sec. 2 (a).
658 ibid art. 19.
699 ibid art. 20.
107
nation violated its obligations. A decision passed by the panel upon such an application shall
have legally binding effect on the parties.00
IV. B i- A n d M u l t il a t e r a l A g r e e m e n t s
Finally, there is the proposal that the adaptation of antitrust law including merger review
should best rely on a continuing network o f bi- and multilateral agreements without the estab
lishment o f any international regulator}' framework or authority. 01 The proponents of this ap
proach stress that the gradual conversion o f antitrust regulations and procedures under mainte
nance o f national competency' is the only tactic with a fair chance o f realization. 7 The rejection
o f any centralization is justified by the argument that a variety' o f economic theories and com
petition policies best guarantee step-by-step improvement on an international level. The detec
tion of flaws is easier in an environment o f co-existing, different approaches. Well-tried ele
ments of other legal systems can be substituted for weaker components o f ones own method.703
It is suggested that a first step of coming closer to a sufficient level o f unification and competition-orientation could be an agreement upon cooperation rules encompassing, for instance, the
abandonment of particularly blatant cases o f discrimination, e. g. the exemption o f export car
tels.704
There exists a whole plethora o f bi- and multilateral agreements regarding assistance in en
forcing antitrust provisions. The most famous example of these agreements is most likely the
Agreement Between The Government of the United States o f America and the C o m m issio n o f
the European Communities Regarding the Application of their Competition Laws o f Sep. 23rd,
1991 0:>which was supplemented in by the Agreement Between the European Communities and
the Government o f the United States on the Application o f Positive Comity' Principles in the
Enforcement o f their Competition Laws o f June 4th, 1998 06 and successfully used during the
'0 0
ibid. art. 20, sec. 4.
-01
Internationalization, supra note 661 at 360-61; Joel I. Klein, A Reality Check On Antitrust Rules In The
World Trade Organization, And A Practical Way Forward On International Antitrust, in OECD, ed.. Trade
A n d Competition Polities Exploring The IWaps Forward" (Pans: OECD, 1999) 37 at 39.
Hans-Peter Seitel, Nationale Wettbewerbsordnungen als Basis intemationaler Wettbewerbspolitik [1996]
WuW 888; Roscoe B. Starek III, International Aspects o f Antitrust Enforcement [1996] 19:3 World Com
petition 29 at 42.
D. H. Ginsburg & S. H. Angstreich, supra note 505 at 224.
H-P. Seitel, supra note 702 at 895.
online: < http://www. usdoj.gov/atr/public/intemational/int arrangements.htm> (date accessed: Aug. 20th,
2000).
ibid; the latest agreement was concluded on July 11th, 2000 between the Government o f the United States and
the Government o f Mexico.
-02
70J
704
705
108
investigation against Microsoft.0 Unlike previous arrangements this one is not designed solely
to protect interests o f sovereignty, but it enhances the elements of cooperation and coordina
tion. A decisive component o f these agreements is the incorporation o f positive cornin
clauses providing for the possibility of requesting the respective other party to proceed against
an undertaking whose behaviour violates antitrust provisions in the requesting country.'08
Bilateral agreements can take the form o f Mutual Legal Assistance Treaties (MLATs) bind
ing the signatory states 09 or Memoranda o f Understanding (MoUs) leaving it optional to the
parties to assist in a particular case. The former ones generally prove to be more effective as
they allow for a broader range o f possibilities esp. with regard to the sharing o f confidential
information. Not only do the 1995 International Operations Guidelines stress the importance of
bilateral cooperation 10 but also the 1994 International Antitrust Enforcement Assistance A c t11
provides a legislative framework for bilateral agreements, and their proliferation can be expected
for the future.
Apart from bilateral agreements there also exist multilateral agreements that - at least par
tially - encompass competition-related provisions. The N orth American Free Trade Agreement
of 1994 12 (NAFTA) contains in its 15th Chapter covenants dealing with competition policy
matters. The parties are required to maintain or adopt measures to counter distortions o f com
petition 13 and to cooperate and to coordinate their enforcement efforts. 14 A Working Group
on Trade and Competition has been established which may recommend further harmonization
of the law and practice dealing with NAFTA-wide private anticompetitive practices that could
well comprise anticompetitive M & A s.15
708
The consultations during die Boemg/McDonnell-Douglas investigations were also earned out according to
the terms o f the agreement.
J. P. Griffin, supra note 615 at 181: Subsequent to the agreement between the U.S. and the EU, the U.S. sent
36 requests and received 42, whereas in the year pnor to the agreement the exchange had accounted for 4
sendings and 2 receivings only.
Agreement between the Government of the United States of America and the Government of Australia on Mutual Antitrust
Erforcement Assistance 1997, online: <http://www.usdoj.gov/atr/public/intemational/docs/usaus7.htm> (date
accessed: Aug;. 20th, 2000).

1995 International Operations Guidelines, n^pfsnote 506.
supra note 645.
North American Free Trade Agreement Between the Government of Canada, the Government ofMexico, and the Government
of the United States, Dec. 17th, 1992, Can. T. S. 1994 No. 2, 32 IJ_M. 289.
ibid. Art. 1501 (1).
ibid.
109
An interesting objection to a centralized system has to do with the dimensions o f an inter

national or even wodd-wide antitrust authority. In order to cope with the expected flood of
notifications, such an agency' would have to be o f a size many times greater than even the
worlds largest current antitrust authorities. An administrative body o f these proportions would
be unable to function efficiently. On the contrary7, its operations would be impeded by dis
economies o f scale and thereby miss the goal of saving time, effort, and financial resources. 16
Besides, it is observed that the bulk o f international antitrust cooperation is already allowed
through bilateral agreements which have performed excellendy. 1
V. C r i t i q u e
The proposed solutions are manifold and all differ in various details. Yet it appears that an
ideal answer has still to be devised. The attempt to gradually harmonize competition law is
certainly less radical than an internationally unified system. Limiting changes to an alignment of
antitrust objectives and administrative processes holds good chances o f realization as it main
tains national control over the law untouched. 18 It is particularly tailored to meet the reserva
tions o f the U.S., which demonstrates most bluntly its reluctance toward any internationaliza
tion. 19 However as long as the national laws and practices are not brought in line - and there is
no guarantee that they ever will there will be ample occasions for dispute. Certainly, the non
existence o f consensus itself is not the primary7insufficiency7, but the lack o f some sort o f con
flict-settling authority capable of making binding decisions is. Without such a resolution mecha
nism, the harmonization approach runs the risk of getting stuck halfway through and being re
placed by the traditional habit of opportunism and the exertion o f political and economic pres
sure. 20 Arguably, the functioning o f agreements relying on the concept o f positive comity7 de
pends on the existence o f a sound competition law framework and a vigorous enforcement
' I5
Similar, albeit not as advanced, attempts exist in South America. The most recent agreement is Mercosur
comprising .Argentina, Brazil, Paraguay, and Uruguay established under the Treaty ofAsuncion, March 26th, 1991
(1991) 30 IL.M. 1034.
H.-P. Seitel, supra note 702 at 894.
*r The U.S. have so far entered agreements upon antitrust cooperation with seven countries: Australia, Canada,
the EU, Germany, Israel, Japan, and most recently Brazil. See online: < http://www.usdoj.gov/atr/public/ in
ternational /in t_arrangements.htm > (date accessed: Aug. 20th, 2000).
is \Vorld -Antitrust, supra note 663 at 13; K- Luz, supra note 298 at 155.
~19 It also seems that the EU could favor the harmonization approach. The first bilateral EU-U.S. agreement was
blocked by France alleging that the Commission lacked the mandate to close such an agreement even though
it stressed that it had no objections as to the substance. The arrangement was subsequently okayed by the
Council. However, to avoid such embarrassing incidents for the future it seems likely that the EU will resort
to the harmonization concept.
720 K. Luz, supra note 298 at 155.
110
which both is questionable regarding all states that enacted competition laws during the last
decade.
On the other hand, the proposals centering on the implementation o f an international re

gime be it within the framework o f the W TO or the OECD - reveal the deficiency o f re
alizability. There are great controversies as to what international organization should serve as a
nucleus for the project. The strong preference for the OECD shown by Japan and the U .S.21 is
most likely rooted in the fact that the decision-making process in that organization is based on
the principle o f unanimity. The need for accord in all details will substantially affect the effi
ciency o f an OECD-based regime and result in ineffectuality.722 The European Commission
pushes into the other direction because, if the WTO served as an international forum, the
Commission would significandy gain power and influence. The only reason that really could
lead to results comes from private economic actors. Business favours a harmonization o r inter
nationalization, at least with regard to procedures.23 However businesses have not yet made
themselves suffidendy heard to really accelerate the process o f shaping an international antitrust
regime despite their considerable b a rg a in in g power. Another obstacle lies in divergent ideas o f
the objectives o f a unified antitrust law system. While the industrialized countries perceive only
the preservative aspect, transient and developing economies aim at using a competition law re
gime as a vehicle to increase their wealth. These variances will presumably lead to controversies
when it becomes necessary to decide cases o f alleged antitrust violations.
So far, all attempts to establish an effident comprehensive antitrust law regime have
failed. "'4 The only example of partial success, the EU, might have thrived for the reason that
despite undeniable differences, the European countries display a relative homogendty, in con
trast to Latin American or African countries. The political value of blocking an effidency-
see e. . J. I. Klein supra note 701 at 41.
Even within the U.S. there is discord about the question o f the ideal international forum. The Agencies are
among the strongest opponents o f a WTO-based internationalization, in part because o f the fear that the con
cept o f promoting competition would be undermined by industrial policy considerations, in part for the rea
son o f the inevitable decrease in reputation, set Internationalization, supra note 661 at 379. President Clinton,
however, has at some point supported the WTO as a forum for international antitrust, see Yerxa Says, U.S.
Has N ot Decided Whether To Pursue Multilateral Antitrust Code 11 lnt'L Trade Rep. (May 4th, 1999) 695 at
695.
A uniform procedural law could end the exploitation o f jurisdictional and evidentiary gaps and the recruitment
o f home governments to protect against antitrust actions o f foreign authorities.
The first initiative was the League o f Nations which was designed to develop an international system for the
control o f cartels. It failed for the reason that, especially in die European countries o f the inter-war period,
cartels were a favored means to ensure the nations wealth, see Spencer W;eber W'aller, Neo-Realism and the
International Harmonization of Law: Lessons from Antitrust (1994) 42 U. Kan. L. Rev. 557 at 569-71.
Ill
enhancing merger abroad by extraterritorial application o f domestic provisions still represents

too great a lure to a politician to be deliberately given away. Therefore, any international forum
is at the risk o f becoming a mere reflection o f national interests.
The DIAC proposal has to be reproached for being over-ambitious. Inherent in the model
is a considerable ceding o f sovereignty rights to an international authority. This is improbable
not only with regard to the U.S. or the EU, but also the young nations o f Eastern Europe which
enjoy their newly found independence supported by a wave of nationalism. The authorities en
visaged by the DIAC would have immense power but at the same time be completely inexperi
enced in how to handle a transnational merger.25 Moreover, the DIAC rests on an easily dis
cernible European foundation. Many o f the provisions conceptually resemble to the European
Merger Control Regulation 26, in particular concerning the concept o f defining a concentration
by reference to control and the principle of preventing of a dominant position, which is in
consistent with the U.S. approach o f thwarting the development o f anticompetitive market
structures in their incipiency.2 Attempting to address all the major differing concepts o f merger
control, the drafters were forced to rely to a great extent on ambiguous and vague terms giving
ample space for interpretation. This vagueness is prone to give rise to a variety o f controversial
disputes when it comes to application in a specific case.28 The compromises that the DIAC is
trying to accomplish become particularly apparent in the way it deals with the evaluation of effi
ciencies. Art. 12 is very similar to the former U.S. concept o f excluding the approval o f an anti
competitive merger solely on efficiencies grounds. O n the other hand, the reference to a politi
cal justification clearly stems from a European perspective. Given that this political exception
expressly refers to efficiencies, the exemption is inconsistent with the prohibition o f approval
for the reason o f efficiencies only.
Even though a gradual improvement of antitrust law through bi- and multilateral agree
ments or harmonization lacks a dispute settling mechanism, it seems for the time being that the
pursuit of that approach has the greatest prospect o f realization. Arguably, international coop-
'2 6
728
With regard to all international Agencies, especially within the WTO, J. I. Klein, supra note 701 at 42.
EEC, Regulation 4064/89 (EEC) of the Council concerning the Control of Mergers o f Dec. 21", 1989, [1989] O. J. L
395/1, as amended by Regulation 1310/97, [1997] O. J. L 180/1.
Daniel J. Gifford, The Draft International Code Proposed At Munich: Good Intentions Gone Awry (1997)
6 Minn. J. Global Trade 1 at 4-5.
ibid. at 20-21; Debra A. Valentine, Building A Cooperative Framework For Oversight In Mergers - The
Answer To Extraterritorial Issues In Merger Review (1998) 6 Geo. Mason L. Rev. 525 at 529.
112
eration on the grounds of such agreements only amounts to a fistful o f largely informal under
standings that are little more than a (...) promise of mutual assistance. 29 But as all other sug
gestions entail the diminution o f national power, the U.S., as the worlds economically leading
nation, will simply continue to reject them as long as there is no necessity compelling accep
tance. Besides this, why should the Agencies being a voice o f importance in the U.S. sup
port suggestions that would inevitably lead to a decrease in filings and consequently to a de
crease in their funding? With the discover}' o f fees as a means o f deficit reduction, the incentive
to reduce the quantity of filings is fairly limited. A successful implementation o f either harmoni
zation or internationalization seemingly requires a hegemon who determines the general pattern
o f a world-wide antitrust law. Currendy there are two likely candidates for this function the
U.S. and the EU. One cannot yet say which will be the leading force in the process. Apparendy,
the more administratively driven European system with no criminal provisions and limited pri
vate rights is greeted more receptively by a higher number o f nations and could therefore be a
more suited candidate. 30 But the question remains whether the U.S. would be prepared to ac
cept this.
It is doubtful whether any harmonization o f antitrust can be designed. It could well be that
it occurs mosdy by accretion. For the time being there seems to be no escape from accepting
the status quo along with its unpleasant features, such as extraterritorial application and the fact
that finding a solution will be a slow process.31 The next few years will most probably be char
acterized by conflict resolution by ad-hoc political and diplomatic negotiations. While enforce
ment authorities will rely upon comity or prosecutorial discretion to minimize friction in routine
cases, some degree o f conflict will be unavoidable.
Intemanonalization, supra note 661 at 377.

D. H. Ginsburg & S. H. Angstreich, supra note 505 at 230.
see e. . Mitsuo Matsushita, Competition Law And Policy In The Context Of The WTO System (1995) 44
DePaul L. Rev. 1097 at 1098.
113
C o n c l u s io n
Transnationalization undeniably exerts a considerable influence on U.S. merger review.
Nonetheless, the hypothesis taken as a point o f departure cannot entirely be supported by the
findings. As a comprehensive conclusion it can only be stated that the effects generated by
transnationalization are extremely heterogeneous. The need to prevent arbitrage by foreign in
vestors does not foster leniency in merger review to lure capital from abroad. However, the
pressure o f international competition certainly influences U.S. merger review perceptibly. The
principle o f protecting competition is p a rtially corrupted by considerations o f competitiveness.
As a consequence, an assessment o f M & As reveals profound restructuring o f the underlying
analysis as well as aggravations o f already existing problems and inconsistencies, whereas in
other respects the current merger wave and cross-border markets have not entailed dramatic
shifts in the review process. Even if a fair diagnosis could not be that the Agencies pursue a
clear protectionist concept, their practice reveals often stunning misinterpretation o f economic
facts. As an example one might once more refer to the different results in assessing some major
mergers in the oil industry'. The apparent leniency' toward the merger o f Exxon and Mobil a
transaction that undeniably had a huge impact on the structure o f an entire industry' is simply
inconsistent with the hostile position taken when BP and Amoco merged. Taking further into
account the apparent ideas behind the approval o f the merger between Boeing and McDonnellDouglas, an example that is admittedly almost overused, any statement that competition is the
one and foremost concern of U.S. merger review lacks honesty'.
Transactions that involve U.S. undertakings only and that mainly affect domestic markets
are subject to an enforcement policy' that is by far more aggressive than at the time o f Reagonomics. The Agencies pursue a strict approach as set out in their Merger Guidelines, particu
larly concerning market definition and efficiencies two elements that are especially suited to
manipulation. On the contrary, as the examination showed, M & As involving foreign enter
prises seem to be under a much closer scrutiny than transactions involving U.S. undertakings
that face competition from abroad. As to M & As with an international dimension, the tempta
tion to yield to the demands o f increased competition becomes more manifest. With regard to
the assessment o f competitive effects, competitiveness has in areas replaced the traditional
goal o f pure consumer welfare. Allocative and productive efficiency' do not always determine
the policy' o f merger review. However, the degree o f market concentration reached in U.S. in
dustry' often dramatically exceeds the thresholds set in the Merger Guidelines and that discrep
114
ancy can most feasibly explained by the anxiety o f the Agencies to provide U.S. firms with the
possibility to realize competitiveness-enhancing efficiencies. As an indication for this, one might
refer to the shift of the gist in U.S. merger control enforcement to the prevention o f unilaterally
imposed price increases which allow, in principle, a higher tolerance than the focus on collateral
harm.
An inverted policy is followed in the field o f innovation. International competitiveness be

ing an objective expressly mentioned, the Agencies here take a highly aggressive approach. The
concern about the possible backwardness o f U.S. industry - often concealed behind reasoning
with regard to consumer benefits - has led rather to over- than to underenforcement. U.S.
merger control almost appears somewhat zealous, given that the decisions of FTC and DOJ are
necessarily based on speculative elements instead o f facts that understandably justify a diagnosis
after the application o f sound economic reasoning.
One weak spot that has not been eliminated is the analysis o f efficiencies. Efficiencies area
often invoked as a justification for the approval o f competitively questionable mergers, often
enough for the aim of international competitiveness. Despite the number of failed mergers, the
efficiency defense enjoys growing acceptance and the position that efficiencies are still not taken
into account to a sufficient extent is frequendy expressed.
A further source o f concern is the combination o f broad discretionary power conferred to

the Agencies and the structure of the merger review procedure and confidentiality requirements.
The non-disclosure of the background facts o f simple approvals provides ample room for instrumentalization and relevance of non-competition-related factors. Although ill-suited to
cloaking the approval o f mega-transactions that inevitably produce negative effects on competi
tion, the interplay of these factors certainly enshrouds a vast number o f decisions that are not
entirely based on appropriate reasoning. This concern is intensified by the predictions o f the
public choice model which are, to a certain extent, plausible. Many cases clearly demonstrate
that U.S. merger review is far from being unaffected by considerations that are not congruent
with ostensible public interests.
In addition, the U.S. pursues a concept o f a selective industrial policy that radiates into the
field o f merger review. Apart from the favorable treatment of production and R&D joint ven
115
tures, this policy has not engendered any egregious consequences concerning merger review.
Proposals to give an increased weight to industrial policy considerations in the framework o f
merger review justified by the example o f other economic systems - have yet to be accepted.
Against the background o f heterogeneity and the conclusion of a non-existence o f a blunt

instrumentalization of U.S. merger review, the further questions suggests itself as to whether
this picture is the result o f less perceptible yet maybe even farther-reaching effect o f transna
tionalization that is indeed capable o f putting the very fabric o f U.S. merger review into ques
tion. It is lucid that jurisdictions confined to nations can hardly cope with transnationalization in
a geographical dimension. But furthermore the concept o f antitrust law and merger review roots
in and gains legitimacy from models, methods, and judicial tools that are oriented to the tradi
tional pattern o f national jurisdictions and economies. What if these are simply not fit to meet
conceptually the challenges transnationalized market structures are to antitrust law?
The being unsuited o f relatively static techniques relying on market shares and prices to
determine negative impacts on discrete markets for the globalized, dynamic environment that is
emerging would at least furnish an explanation for some o f the inconsistencies U.S. merger
control is showing. A frontal attack o f transactions exceeding a certain size is a performance
vet)' rarely given by the Agencies - with the exception o f smoking gun cases like the Micro
soft/Intuit example where the declared intention to foreclose an extremely important and
promising market was unquestionable. The FTC and DOJ often prefer theaters o f war o f minor
importance like gasoline markets in Guam, flea products, or ski-lift ticket prices in resorts in
Colorado. Without getting too much into speculation, one cannot help feeling that this ap
proach serves to cover a great uncertainty with regard to how to assess competitive effects in
the transnationalized, dynamic environment this thesis was meant to describe.
There is a conspicuous problem o f transnationalization created through the o f extraterrito

rial application o f antitrust law which has become increasingly common due to the international
activities o f business actors. The potential for conflict on an international level is apparent, even
though the reproach of outright unlawfulness is certainly not justified and has resulted in flour
ishing proposals, reaching from intensified cooperation between existing national authorities to
the establishment of a supranational regulator}' framework including the required authorities and
judicial bodies. Nonetheless, the probability o f their realization decreases in inverse proportion-
116
alitv to their ambition. The most likely scenario consists in the continuance o f the current sys
tem o f bi- and multilateral agreements that might one day lead to international standards. Ar
guably, this solution lacks the charm international standards enforced by a single authority can
lay claim on, especially from the businesses point o f view. A uniform system would avoid pro
cedural and substantive frictions, would provide a forum to calm political differences, and could
ensure a less cost-intensive and more expedient processing of notifications. However, in this
respect pragmatism calls for an answer to the question what is implementable? , and appar
ently this answer will fall short of the ideal.
U.S. merger review is currendy in a state of transition. The exigencies of transnationalized

market structures and technological changes require the adaptation to the demands o f the 21
century economy, which often enough collide with the traditional doctrines. Analysis and diag
nosis o f competitive effects are immensely compounded by the dynamism of the economic and
- albeit to a lesser extent political development. It is almost impossible to predict wbat result
the changing economic structures will produce for antitrust law. In the short-term, however, the
adherence to the actual patterns and models with some, but not spectacular, changes appears to
be the most probable outcome despite all deficiencies.
117
A p p e n d ix
T a b l e 1 - D e c is io n s O n D o m e s t ic M e r g e r s
Name
U.S. v. AT&T Corp.
and MediaOne Group,
Inc.: No. 1: 00CV01176
(RCL), Amended Com
plaint o f Mav 26*, 2000
U.S. v. Allied Signal,
Inc. & HoneweO, Inc.,
CASE NUMBER
1:99CV02959, Com
plaint o f Aug. 11*, 1999
U.S. v. Bell Atlantic

Corp. and G TE Corp.,
Complaint o f Mav 7th,
1999, Civil No.
1:99CV01119
Product Market
Special
Geographic
Market
Market Shares And
Aggregation, pro m o
tion, and distribution o f
broadband content
U.S.
Vertical integration:
Access to sensitive
information
FTC ordered the

divestiture o f all inter
ests in Service Co.
Traffic Alert and Colli

sion Avoidance Sys
tems, Search and Sur
veillance l eather Ra
dar, Reaction and Mo
mentum Wheels, Iner
tial Systems
U.S.
TCAS: 60 o, Search and

Surveillance Weather
Radar Monopoly, Reac
tion and Momentum
Wheels: 50%, Inertial
Systems: Substantial
elimination
Remedy was divesti

ture o f a whole vanety
o f technical businesses
Wireless
mobile
telephone
service
Local or regional m ar
kets within the U.S.
where there is an overlap
o f Cellular and PCS or
Cellular and MSA (met
ropolitan statistic areas)
Concentration
All Cellular MSA Ovedap Areas:

Combined post-merger market
share o f 75-90 (HHI 5500)
All Cellular PCS Overlap Areas:
post-merger share o f m ote than
40% (HHI >2000)
Defendants
had to divest
all wireless
system assets
U.S. v. Sabreiiner
Corp., Civil Action:
95-059, Complaint
o f Feb. 6th, 1995
The sale o f iet fuel by firms offering the

Lambert-St. Louis
Monopolyprovision o f certain airport terminal
International
services called fixed base operator or
Airport ("Lambert
"FBO" services to transient general
Field"), Missouri
aviation aircraft
U.S. and State o f Col. v.
Provision o f skiing to
Colorado
Post-merger HHI of
Divestiture o f all assets
Vail Resorts, Inc., Ral
in Ralston's Arapahoe
residents o f Colorados
2228 (increase o f 643)
ston Resorts, Inc. and
Front Range
Basin Resort in Colo
Ralston Foods, Inc.,
rado by Defendants
Crvil Action: 97-B-10,
Complaint o f lan. 3rd,
1997
Radio Advertising Time
U.S. v. Westinghouse
Philadelphia
Philadelphia: postElectric Corp. and
and Boston
merger H H I o f 2800
Infinity Broadcasting
(increase o f 924); Bos
Corp., Civil Action No.
ton: post-merger HHI o f
1:96CY02563, Com
plaint o f Nov. 12th,
1996
U.S. v. Aetna, Inc. and
Health maintenance
United States
Houston: 63% post
the Prudential Insurance organization ("HMO")
D epartm ent
merger market share;
Co. o f America, Civil
plans and poult o f
o f Commerce
Dallas: 42% post-merger
Action N o. 3-99 CY
service ("POS") plans
Metropolitan
market share
398-H, Complaint o f
Statistical
June 21st, 1999
Areas in and
around
Houston and
Dallas, Texas
U.S. v. Computer
Mainframe com puter U.S.
VSE tape management software: Post-merger
The remedy was
Associates Interna
systems management
H H I 9746 (increase o f 4756)
a non-exclusive,
tional, Inc. and
software products
VSE disk management software: Post-merger
wodd-wide, and
Legent Corp., Civil
and cross-platform
irrevocable
systems management
Action No. 95 CA'
VSE security software: Post-merger HHI o f
licence for a
1398 (TPJ), Com
software
vanety o f soft
plaint o f luly 28 th,
VSE job scheduling software: Post-merger
ware products
1995
sold by Legent in
VSE automated operations software: Post
compliance with
merger H H I o f 7663 (increase o f 463)
a procedure
xxx
Cross-platform systems management software:

Elimination o f competition
L.S. and State o f Texas
v. Kimberly-Clark Corp.
and Scott Paper Co.,
Civil Action N o. 3:95
C \' 3055-P, Complamt
o f Dec. 12th, 1995
Retail facial tissue

Retail baby wipes
In the matter o f Global

Industrial Technologies,
Inc., FTC File 981 0173,
Complaint o f June 26th,
1998
In the matter o f Service
Corp. International,
FTC File No. 981 0353,
Complaint o f Ian. 15th,
1999
In the matter o f El Paso
Energy Corp., FTC File
No. 991 0178, C om
plamt o f Ian. 6th, 2000
Glass-furnace silica
refractories
U.S.
Merger will create mo

nopoly as parties are the
only two producers o f
the relevant product
Funeral services and

cemetery services
Various local
markets in the
South
western U.S.
Post-merger HHIs range

from 2900 to 10000
1. Transportation o f
natural gas out o f pro
ducing fields
1. Some areas
o f the G u lf o f
Mexico o ff
the coast o f
the State o f
Louisiana
1.
a) Post-metger HHI o f
b) Post-merger HHI o f
Merger also reviewed

by European Commis
sion
Retail facial tissue: Post

(increase o f 705)
Retail baby wipes: Post
(increase o f 1501)
2. Transportation o f
natural gas into gas
consuming areas
In the matter o f M ed
tronic, Inc., FTC File
No. 981-0329, Analysis
T o Aid Public C om
m ent o f March 23rd,
1999
L\S.
prescribed in
detail
Research, development,
manufacture, and sale of
non-occlusrve arterial
pumps
2. Eastern
Tennessee
and northern
Georgia and
certain p o r
tions thereof
U.S.
Divestiture o f AP
Green Silica Refracto
ries as an ongoing
business
2. Post-merger HHI
ranges from 5700 to
10000 (increases o f 1000
to 4500)
Post-merger HHI o f
6450 after an increase o f
340
Market entry was

deemed impossible;
FTC ordered the
divestiture o f the
acquired firms nonocclusive arterial pump
division to Baxter, Inc.
- a L'.S. firm
I
XXXI
T a b l e 2 - D e c is io n s O n M e r g e r s
of
U.S. F ir m s F a c in g
in t e r n a t io n a l
C o m p e t it io n
Name
Relevant Market
Geo
graphic
Market
Market Shares And

Concentration
Special
In the m atter o f
CLC Interna
tional, Inc. and
HFS, Inc., FTC
File No.
971-0087, Con
sent Agreement
Package o f Dec17. 1997
In the matter o f
Digital Equip
ment Corp.,
FTC File No.
981 0040, Com
plaint o f April
23rd, 1998
Timeshare ex
change services
Worid
Post-merger market share

o f approximately 100% o f
the worldwide timeshare
vacation exchange market
The accepted was the divestiture o f

one o f the two timeshare exchange
subsidiaries to an already identified
third party within ten days o f the
acquisition
1. Manufacture and sale o f highperformance, general-purpose

microprocessors that are capable
o f running the com puter operating
system software in native mode
that is currendy being developed
and sold by Microsoft Corporation
2-Manufacrure and sale o f all gen
eral-purpose microprocessors
In the matter o f
Time Warner,
inc., Turner
BroadcastingSvstem. Inc..
Tele
com m unica
tions, Inc., and
Libem- Media
Corp., ETC File
961-0004,
Complaint o f
Feb. 3ri, 1997
U.S. v. Pnmestar. Inc. et aL,

Civil
No.:l:98CV011
93 (ILG), Com
plaint o f Mav
12th, 1998
In the matter o f
Cadence Design
Systems, Inc.,
ETC File No.
World
1. 91% post-merger market

share in U.S. %sales (increase
o fl% )
2. Pre-merger market share
o f 90% m U.S. $ sales
3. Elimination o f strongest
technical competitor and
reduction in developing new
technologies
Remedy was licence

to AdvancedMicro
Devices, Inc. for
various intellectual
properties as well as
software to enable
the acquirer to take
part in innovation
3. Innovation in the design and

development o f high-performance,
general-purpose microprocessors
1. The sale o f
L.S.
Vertical integration: The
Remedies: (l)divesriture o f its inter
Cable Television
Commission feared the possi
est in Time Warner by TCI o r maxi
Programming
ble foreclosure o f access re
mum o f 9.2 percent nonvoting inter
Services to Mul
sulting from vertical integra
est in Time Warner, (2) cancellation
tichannel Video
o f long-term carnage agreements; (3)
tion into one entity o f cable
Programming
earner and distribution, as well
significantly reduces Time Warners
Distributors
as cable programming, busi
enhanced opportunities for bundling
(MVPDs)
Turner programming with its own;
ness. Time Warner, Inc. owns
W arner Bros. Studio, a number
(4) bars Time Warner programming
2. The sale o f
o f interests in cable programs,
interests from discriminating in price
Cable Television
against cable systems competing
and is the second largest cable
Programming
distributor in the U.S.
against Time Warner, (5) pro-hibits
Services to MVPD
T urner operates cable net
Time Warner:, cable- service mterworks and film studios, such as
ests from discriminating in carriage
C N N , TNT, WTBS, Headline
decisions against rival programmers;
News, Cartoon Network and
and (6) requires Time Warners cable
T urner Classic Movies. TCI is
service interests to carry a rival to
CNN
the largest cable television
system in the U.S.
The transaction as onginally
proposed would have created
the w odds largest entertain
m ent company
Delivery o f multi
NorthVertical integration: D e
ple channels o f
fendants want to acquire
American
video program
continent
110B satellite slots in order
ming directly to
to foreclosure competition
home by cable
by Direct Broadcasting
Satellite (DBS) to tradi
tional cable
The research,
Vi:odd
Vertical integration:
To prevent the
development,
1. Cadence will become less likely to permit
anticompetitive
and sale o f
potential suppliers o f constraint-driven, sliapceffects feared the
constraintbased integrated circuit routing tools to obtain
ETC proposed
XXXII
971-0033,
Analysis To Aid
Public Com
ment o f May
15* 1997, 62
F.R. 26790
driven, shapebased integrated

circuit routing
tools
United Sates v.
Aluminum
Corp. o f Amer
ica, Inc. and
Reynolds Metals
Company, Civil
Acnon No. 00CV-954 (RMU),
Competitive
Impact Satement o f June
6* 2000
In the matter o f
Rohm & Haas
Company and
M orton Inter
national, Inc.,
FTC File No.
991-0112,
Complaint o f
lulv 13* 1999
In the matter o f
Knogo Corp.
and Sensotmatic
Electronics
Corp., FTC File
No. 941-0126,
Press Release o f
April 21 1995
1. The refining and

sale o f smeltered
grade alumina
(SGA)
2. The refining and
sale o f chemical
grade alumina
(CGA)
access to Cadences integrated circuit layout

environments
m andatory licensing
and access to Ca
dence products as
well as a limitation o f
further acquisitions
2. Successful entry mto the constraint-driven,

shape-based integrated circuit routing tool market
will require simultanous entry mto the market for
integrated circuit lavout environments, as well
1. For SGA: Post-merger
DOJ required divestiture o f alumi
1. For
num process mg facilities in each
SGA:
market share o f 38/o
marker, buyer has no t been chosen
W odd
(increase o f 10%)
yet
2. For CGA: Post-metger
2. For
market share o f 59%
CGA:
N orth(increase o f 20%)
Amenca
Research, devel
opment, manu
facture, and sale o f
water-based poly
mers for the use in
floor care products
N'orthAmenca
Complaint docs neither

mennon concrete HHI nor
market shares but solely
sates that the market is
highly concentrated the
parties being two out o f
three sellers o f the relevant
product.
Divestiture o f the com plete Morton

Floor Care Products facilities to
GenCorp. demanded
Electronic Article
Surveillance Sys
tems (EAS) to be
integrated in the
goods to protect
woddwide
The acquisition o f Knogos

SuperStnp technology
embedded in a system o f
cross-licenses and royalties
with regard to future
improvements would have
reduced K nogos incentive
to pursue further R & D
technologies by decreasing
the number o f research
tracks.
The consent agreement provided for

the prohibition o f the acquisition o f
the SuperStnp technology, Sensormanc is only allowed to obtain a
non-exclusive license for the U.S.
and Canada. The consent order also
sates that Sensotmatic can acquire
the technology or exclusive licenses
outside the U.S. or Canada.
XXXIII
T a b l e 3 - D e c is io n s I n v o l v in g N o n -U .S . F ir m s
Name
L'.S. v.
Spnnt Corp.
and Joint
Venture
Co., Civil
Action No.
95 CY 1304,
Competitive
Impact
Statement
o f lulv 13th,
1995
Product Market
Markets for international
telecommunications
services (including en
hanced telecommunica
tions scrvices)bctwecn
the United States and
France and the United
States and Germany, and
the emerging markets for
seamless international
telecommunicanons
(including
enhanced telecommuni
cations) services
U.S. v. Dairy Farmers o f

America, Societe de
Diffusion Internationale
Agro-Alimentaire, and
Sodiaal N orth Amenca
Corp., Civil Action No.
CNOO-CV-1633, Com
plaint o f March 31st.
2000
U.S. v. Fiat
S.p.A., Fiat
Acquisinon
Corp., New
Holland N.
V., New
Holland
North
Amenca,
Inc. and
Case Corp.,
Case No. 1:
99CV0297,
Complaint
o f Nov. 4th.
1999
In the
matter o f
Roche
Holding
Ltd., FTC
File No. 971
0103, Com-
The sale o f
branded
whipped
butter and
branded
stick butter
through
retail oudets
Geographic
Market
Market Shares And
U.S., France,
Germany
Vertical Integration:
France Telecom and
Deutsche Telekom
could use their
dominant position
and monopolies in
domestic markets to
disfavor their U.S.
competitors o f
Spnnt Corp. ac
quired by them
The greater
Philadelphia
and New York
metropolitan
1. The development, produc

tion, and sale o f 4'XD (Wheel
Drive) tractors
Z The development, produc
tion, and sale o f large 29tD
tractors
tion, and sale o f small square
balers
tion, and sale o f large square
balers
U.S. and
Canada
Special
Concentration
Final Judgement o f July 13th, 1995:
1. Requirement o f disclosure for
Spnnt Corp. when using services
provided by France Telecom or
Deutsche Telekom
Z Information firewall for confi
dential information between Spnnt
Corp. and -France Tele
com /Deutsche Telekom
3. Sprint and Joint Venture Co. shall
not offer (direcdv or through France
Telecom or Deutsche Telekom), and
shall not provide facilities to France
Telecom o r Deutsch Telekom ena
bling France Telecom or Deutsche
Telekom to offer, any particular
international
telecommunications or enhanced
telecommunications service between
the United States and France o r
Germany
1. a) G reater Philadelphia branded stick
ETC wanted
butter m arker Post-merger H HI o f 4744
an LLC to be
(increase o f 116), b) Branded whipped
formed to
butter in the Philadelphia metropolitan
which certain
area: Post-merger H H I o f 4428 (increase o f assets were to
1263)
be transferred
and w ho
Z a) Branded stick butter in the New York
should sell
metropolitan area: Post-merger H H I o f
branded butter
4851 (increase o f 649), b) Branded
as com petitor
whipped butter in the New York metro
politan area: Post-merger HHI o f 5238
(increase o f 1375)
1. 4WD tractors: Post-merger H H I of
Z Large 2W D tractors: Post-merger HHI
o f 4460 (increase o f 510)
3. Small square balers: Post-merger HHI
4. Large square balers: Post-merger HHI
5. Self-propelled windrowers: Elimina
tion o f competition

tion, and sale o f self-propelled
windrowers
1.The research, devel
U.S.
opment, manufacture
and sale o f Cardiac
Thrombolytic Agents
1. Cardiac T hrom
bolytic Agents: Post
merger H H I 8698
(increase o f 3220)
2. The research, devel

opment, manufacture
Z DAT Reagens:
post-mcreer H H I
Acquisition o f U.S. firm by Swiss

firm
XXXIV
plaint o f
Feb. 25th,
1998
and sale o f D AT Rea

gents used in workplace
testing.
4878 (increase o f
704)
U.S.
In the
1. Research, develop
matter o f
ment, formulation.
Reckitt Sc
marketing, and sale o f
Colman pic.
hard surface bathroom
FTC File
cleaners
No. 991
0306, Com
2. Research, develop
plaint o f
ment, formulation.
Jan. 18th,
marketing, and sale o f
2000
fine fabnc wash products
l\S .
1. The research,
In the matter o f Bax
ter Healthcare Corp.
development, manu
and Immuno Interna
facturing, and sale o f
Factor M il inhibi
tional AG, FTC
tors for hemophili
Docket No. C-3726,
acs
123 F.T.C. 904, Con
sent O rder o f March
2. The research,
24*,1997
development, and
sale o f fibrin sealant
In the matter o f Rhodia
Corp.. Donau Chemie
AG, and Albnght & Wil
son pic, FTC File No. 991
0237, Complaint o f March
13th, 2000
U.S.
In the
matter o f
ABB AG
and AAB
AG, FTC
2. The manufacture and
File 991sale o f process mass
0040, Com
spectrometers
plaint o f
April 14*,
1999
In the matter o f YNL'
Furnishing o f
N.Y. and Nielsen Media
advertising
Research, Inc., FTC File
expenditures
No. 991-0319, Commeasurement
plaint o f Oct. 22d, 1999
In the matter o f
The manufacture
Momer Lifetile,
and sale o f
LLC. Botal Ltd., and concrete roofing
LaFarge S. A., FTC
tile
Docket No. C-9290,
Decision And O rder
o f Mav 19*. 1999
W odd
Manufac
ture,
marketing
and sale o f
pure
phosphonc acid
1. The manufacture and
sale o f process gas
chromatographs
In the
Manufacture and sale o f
U.S.
U.S.
N orth-
1. Hard surface
bathroom cleaners:
Post-merger HHI
2300 (increase of
500)
Acquisition o f D utch firm (Benckiser

N.Y.) by British (Reckitt & Colman
pic) firm which both do business in
the L'.S.
2. Fine fabnc wash

products: Post
merger HHI o f 8500
(increase o f 700)
The merged entity would h aw
N o L'.S. American fibnn
been the largest manufacturer o f
sealant producer. All has to
plasma products world-wide. As to
be imported even though
the product market 1., the parties
the product is widely used
are the only sellers o f Factor M il
for bleeding control dunng
hemophilia inihibitots, as to market surgical procedures all
2., the parties were the only ones
throughout the world
haim g applied for FDA approval.
Furthermore, market entry was
blocked by a wide range o f tntellectual property_______
Post-merger HHI o f
Acquisition o f British firm (Albright
2940 (increase o f
& Wilson pic) by U.S. firm (Rhodia
630)
Corp.)
Post-merger HHI o f
4764 (increase o f
2310), post-merger
market share o f 70 o
The two ABB AGs are a Swedish

and a Swiss enterprise which toed to
acquire a Dutch firm - Elsag Bailey
Process Automation N.Y. Remedy:
Divestiture o f facilities in Bartlesville,
Oklahoma, as well as in Chicago and
Houston
Post-merger HHI o f
10000 (increase o f
4032)
Acquisition o f U.S. firm by Dutch

firm
FTC wanted to
prevent joint
venture from
holding all excess
capacity in the
rapidly reducing
industry. Price
increases had
allegedly alreadv
happened by the
time o f the inves
tigation
Momer Liftenle LLC was a |Otnt venture set up

by Botal Ltd. an Australian Company - and
Redland p.l.x. which was subsequently taken
over by LaFarge S. A. When the joint venture
was implemented it was not reportable under the
Hart-Scott-Rodino pre-merger noafacnon (HSR).
Nonetheless, the Agencies issued a formal inter
pretation o f the HSR that subjuges the formation
of limited liability corporations under the HSR, as
well. The complaint called for the divestiture o f
either the Boral or Redland (LaFarge) assets; the
construction or divestiture o f a manufacturing
facility with the capacity and capabilities compa
rable to a Botal facility destroyed by fire before
the formation o f the joint venture; dissolution o f
the joint venture altogether; and o r provision to
the Commission o f advance notice for ten years
before acquiring any CRT assets.
90% post-merger
Remedy was the divestiture o f two
XXXV
matter o f
small and large welded
Insiko.
aluminum tubes
Cotp., FTC
D ocket No.
C. 3783,
Complaint
o f Jan. 27*,
1998
In the matter o f
1. Cellulose Ace
Hoechst AG et al.
tate
and RhonePoulenc-Rorer S.
2. Direct thrombin
A., FTC File No.
inhibitors
991-0071, Analysis
To Aid Public
Comment o f Dec.
17*,1999
America
L'.S.
market share
mills each for the production o f

tubes
1. Cellulose Acetate:
Only three producers existed, one o f them
was Celanese Ltd., until tecendy wholly
owned subsidiary o f Hoechst with a 46%
market share. The others were Pnmester, a
joint venture owned to 50% by Eastman
Kodak and Rhodia respectively. Rhodia is a
subsidiary o f Rhone-Poulenc-Rorer. As
one o f the major shareholders o f the new
entity was the Kuwait Petroleum Corp.,
market co-ordination initiated by this
enterprise was feared
Remedies:
1. Divestiture o f all
interest in Rhodia, but
for 5% by RhonePoulenc-Roter
Z Transfer o f all rights
o f direct thrombin in
hibitor to Novartis
2. Direct throm bin inhibitors:

Hoechst is the only seller o f direct throm
bin inhibitors in the U.S. Rhone-PoulencRoter, licensed by Novartis, was in its final
stage o f developing its own product.
Elimination o f actual and potential com
petition was feared_____________________
XXXVI

Transnationalized Markets On U.S.

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INFORMATION TO U SE R S

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Institute o f Comparative Law

Ulrich Mehler, 2000

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Chapter 2 The N otion O f Transnationalization Myths And Realities

C hapter 3 Com petition V. Competitiveness? U.S. Merger Review In Practice

2. Staples, Inc. And Office Depot, Inc.

IV. Telecommunications: AT&T Corp. And Tele-Communications, Inc.

B. Review O f Mergers In Industries Encountering International Competition

I. Mergers O f Domestic Firms

Oil Industry: Exxon Corp. And Mobil Corp.

2. The Metal Industry: Precision Castparts Corp. And Wyman-Gordon Company

3. The Aircraft Industry: Boeing Co. And McDonnell-Douglas Corp.

4. The Defense Industry

a) Martin Marietta Corp. And General Dynamics Corp.

b) Lockheed Martin Corp. And Loral Corp.

a) Microsoft Corp. And Intuit, Inc.

II. Mergers Involving Non-American Firms

Oil Market: British Petroleum p.l.c. And Amoco Corp.

4. The Chemicals Industry: E. I. DuPont de Nemours & Co. And Degussa AG

a) Upjohn Co. And Pharmacia Aktiebolag

b) SNLA S.p.A. And Gambro

c) Ciba-Geigy Ltd. And Sandoz Ltd.

C hapter 4 - Analysis O f Instrumentalization

A. Analysis O f Perceptible Instrumentalization

I. Domestic Mergers On Domestic Markets

2. Assessment O f Anticompetitive Effects

Chapter 5 International Regime

II. The Enforcement Practice O f FTC And DOJ

I. The Harmonization Approach

II. The Internationalization O f Antitrust Law

1. The WTO Proposals

2. The OECD Proposals

III. The Draft International Antitrust Code

IV. Bi- And Multilateral Agreements

U.S. F ed era l C ourts

F T C v. Great Lakes Chem. Corp., 528 F. Supp. 84 (N. D. 111. 1981)

Commission Decision 97/816 o f July 30th, 1997, [1997] O. J. L 336/16 ,cBoeing/McDonnellDouglas

European Commission, XXS'Tlth Report on competitionpolity 1997 (Brussels Luxemburg, 1998)

Administrative Law Review

American Journal o f International Law

Annals Am. Acad. PoL & Soc. Sci.

Annals o f the American Society o f Po

Antitrust L. & Econ. Rev.

Antitrust Law & Economics Review

Antitrust Law Journal

Boston University Law Review

Baylor Law Review

Bureau of National Affairs

Canada Treaty Series

California Air Resources Board

Commerce Clearing House

Chief Executive Official