Authors libby rittenberg 849
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Department has said it would challenge proposed mergers with a
postmerger HHI between 1,000 and 1,800 if the index increased by more
than 100 points. Industries with an index greater than 1,800 are deemed
highly concentrated, and the Justice Department has said it would seek to
block mergers in these industries if the postmerger index would increase
by 50 points or more. Table 16.1 "The Herfindahl-Hirschman Index and
Antitrust Policy" summarizes the use of the HHI by the Justice Department.
Table 16.1 The Herfindahl-Hirschman Index and Antitrust Policy
If the postmerger HerfindahlHirschman Index is found to be…
then the Justice Department will
likely take the following action.
Unconcentrated (<1,000)
No challenge
Moderately concentrated (1,000–
1,800)
Challenge if postmerger index
changes by more than 100 points.
Highly concentrated (>1,800)
Challenge if postmerger index
changes by more than 50 points.
The Department of Justice (DOJ) and the Federal Trade Commission (FTC)
have adopted the following guidelines for merger policy based on the
Herfindahl-Hirschman Index.
U.S. Department of Justice and Federal Trade Commission, 1992 Horizontal
Merger Guidelines, issued April 2, 1992, revised April 8, 1997.
One difficulty with the use of the HHI is that its value depends on the
definition of the market. With a sufficiently narrow definition of the
market, even a highly competitive market could have an HHI close to the
value for a monopoly. The late George Stigler commented on the difficulty
in a fanciful discussion of the definition of the relevant market for cameras:
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org
849
