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I’m geeking out a little about the fact that Open Markets has put the 1968 DOJ Merger Guidelines in the news. Here’s some historical context for an ironic move.
The 1960s was a high-water mark for antitrust enforcement in the U.S. The Supreme Court kept invalidating mergers that would have produced what now looks like a negligible amount of concentration.
For example, in Brown Shoe (1962) the Supreme Court rejected a merger that would have given the combined firm a market share of 5% because of a “tendency toward concentration” in the shoe industry. 
In Von’s Grocery (1966), it rejected a merger that would have produced a 7% market share – in Los Angeles alone.
At the time, there was considerable uncertainty about what kinds of mergers the feds were likely to challenge. As Justice Potter Stewart famously wrote in his dissent to Von’s, “The sole consistency that I can find is that in litigation under § 7, the Government always wins.”
DOJ’s 1968 Merger Guidelines were a response to this uncertainty. The brainchild of economist and Harvard Law professor Donald Turner, they were meant to give firms some clear guidance but also, importantly, to place some limits on the Court.
The 1968 Merger Guidelines drew on existing precedent to give a clear signal about what kinds of mergers the DOJ was likely to challenge. From today’s perspective they look quite stringent.
At the time, however, they were as loose as the DOJ could make them without actively contravening Supreme Court decisions.
The 1968 guidelines reflected what was then the cutting edge in economics – structuralist and pre-Chicago. Indeed, the guidelines closely follow a proposal made in Carl Kaysen and Turner’s 1959 book, Antitrust Policy: An Economic and Legal Analysis.
At the time, no one knew if the courts would respect the DOJ’s new guidelines – but they did, and gradually they took on the force of law. jstor.org/stable/pdf/408…
Over the next decade, though, Chicago replaced Harvard structuralism as the dominant school of antitrust thought. Chicago began with the default assumption that mergers promoted efficiency, and if they did not, that a challenger would emerge on its own.
This implied much less need to be concerned with horizontal mergers or market concentration more generally. And when Reagan appointed the Chicago-oriented Bill Baxter to head the antitrust division, DOJ updated its guidelines accordingly.
The 1982 Merger Guidelines departed from the 1968 Guidelines in several ways, but in general they relaxed the standard considerably for when horizontal mergers would be challenged and nearly eliminated it for vertical mergers.
Even the relaxed standards were barely enforced, with the ABA reporting in 1989 that “Division enforcement actions against conduct other than price-fixing and bid-rigging are extremely rare.” jstor.org/stable/40843138
There have been more updates since. But the general presumption has remained that the structuralist approach of the 1960s was much too rigid and fearful of bigness.
Instead, the default presumption has become that mergers bring efficiencies, and market power is difficult to exercise. Indeed, it has become very hard to demonstrate to the courts’ satisfaction that market power even exists. jstor.org/stable/pdf/10.…
IMO, there’s no question that 1960s antitrust underweighed efficiencies, and I’m not yet convinced that structuralist limits on concentration are the best approach.
But it is fascinating to watch current challengers of concentrated power look to these antecedents for models of how, possibly, to move forward.
And the fact that a set of rules created in 1968 to keep the Supreme Court from preventing mergers now looks like a fairly radical proposal to limit them gives some sense of just how dramatically antitrust enforcement has loosened over the last half century. /fin
