Review of Horizontal Merger Guidelines Likely to Result in Update: Antitrust Division Official

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

A joint review of the Horizontal Merger Guidelines by the federal antitrust agencies is likely to result in an update of the guidelines, said Molly S. Boast, Deputy Assistant Attorney General at the Department of Justice Antitrust Division, on February 8.

Boast made the remark during the Practising Law Institute’s “Antitrust & the Deal, 2010” program in New York City.

The Antitrust Division and the Federal Trade Commission are working together to determine whether the Guidelines (CCH Trade Regulation Reporter ¶13,104), which were issued in 1992 and revised in 1997 to add an efficiencies discussion, should be updated to reflect current practice and economic thinking.

The process has included five workshops, which were conducted over the last two months, as well as an internal review of staffers at the agencies.

A majority of the workshop participants and the staff—but not an overwhelming majority—have expressed a preference for an update, Boast noted. She did not offer a publication date for the update.

One of the goals of the guidelines is to provide transparency or insight into how the government conducts its merger analysis. According to Boast, the current guidelines do not reflect precisely how things are done at the agencies.

A consensus has developed around a need for a flexible analysis under the guidelines. There is a growing view that merger analysis should not be based on a rigid, sequential approach.Methods for determining market concentration could also be updated, according to Boast.

An update could revise the Herfindahl-Hirschman Index (HHI) thresholds to express accurately how the agencies use HHIs. There could be a move to deemphasize HHIs, the official suggested.

After U.S. Clearance, EC Questions Oracle’s Acquisition of Sun

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Oracle Corporation announced on November 9 that the European Commission (EC) has issued a statement of objections (SO) concerning the company’s proposed acquisition of Sun Microsystems Inc.

The SO follows a decision by the U.S. Department of Justice not to challenge the transaction. The Justice Department terminated the waiting period under the Hart-Scott-Rodino Act in August.

“Oracle plans to vigorously oppose the [European] Commission’s Statement of Objections as the evidence against the Commission’s position is overwhelming,” according to a company statement. “Given the lack of any credible theory or evidence of competitive harm, we are confident we will ultimately obtain unconditional clearance of the transaction.”

At the time of Oracle’s disclosure, the EC had not made the SO public. However, the EC announced in September that it had opened an in-depth investigation into Oracle’s acquisition of Sun.

Competition Concerns in Databases Market

According to the EC, its initial market investigation indicated that the combination of the U.S. technology companies would raise serious competition concerns in the market for databases—a key element of company IT systems.

EC Competition Commissioner Neelie Kroes said the transaction would combine “the world’s leading proprietary database company” and “the world’s leading open source database company.”

In its November 9 statement, Oracle said that “the database market is intensely competitive with at least eight strong players, including IBM, Microsoft, Sybase and three distinct open source vendors.”

According to Oracle, “there is no basis in European law for objecting to a merger of two among eight firms selling differentiated products. Mergers like this occur regularly and have not been prohibited by United States or European regulators in decades.”

Justice Department Reaction

In response to the EC’s action, Deputy Assistant Attorney General Molly Boast of the Department of Justice Antitrust Division issued a statement on November 9, reiterating the Antitrust Division’s earlier determination that “the merger is unlikely to be anticompetitive.”

Boast pointed to the number of open-source and proprietary database competitors to justify the U.S. position. “We remain hopeful that the parties and the EC will reach a speedy resolution that benefits consumers in the Commission’s jurisdiction,” Boast said.

The Department of Justice statement appears here on the DOJ website.