1968 Merger Guidelines

1968 MERGER GUIDELINES
1.Purpose. The purpose of these guidelines is to acquaint the business community, the legal
profession, and other interested groups and individuals with the standards currently being applied by
the Department of Justice in determining whether to challenge corporate acquisitions and mergers
under Section 7 of the Clayton Act. (Although mergers or acquisitions may also be challenged under
the Sherman Act, commonly the challenge will be made under Section 7 of the Clayton Act and,
accordingly, it is to this provision of law that the guidelines are directed.) The responsibilities of the
Department of Justice under Section 7 are those of an enforcement agency, and these guidelines are
announced solely as a statement of current Department policy, subject to change at any time without
prior notice, for whatever assistance such statement may be in enabling interested persons to anticipate
in a general way Department enforcement action under Section 7. Because the statements of
enforcement policy contained in these guidelines must necessarily be framed in rather general terms,
and because the critical factors in any particular guideline formulation may be evaluated differently by
the Department than by the parties, the guidelines should not be treated as a substitute for the
Department's business review procedures, which make available statements of the Department's
present enforcement intentions with regard to particular proposed mergers or acquisitions.
2.General Enforcement Policy
. Within the over-all scheme of the Department's antitrust
enforcement activity, the primary role of Section 7 enforcement is to preserve and promote market
structures conducive to competition. Market structure is the focus of the Department's merger policy
chiefly because the conduct of the individual firms in a market tends to be controlled by the structure
of that market, i.e., by those market conditions which are fairly permanent or subject only to slow
change (such as, principally, the number of substantial firms selling in the market, the relative sizes of
their respective market shares, and the substantiality of barriers to the entry of new firms into the
market). Thus, for example, a concentrated market structure, where a few firms account for a large
share of the sales, tends to discourage vigorous price competition by the firms in the market and to

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encourage other kinds of conduct, such as use of inefficient methods of production or excessive
promotional expenditures, of an economically undesirable nature. Moreover, not only does emphasis
on market structure generally produce economic predictions that are fully adequate for the purposes
of a statute that requires only a showing that the effect of a merger "may be substantially to lessen
competition, or to tend to create a monopoly," but an enforcement policy emphasizing a limited
number of structural factors also facilitates both enforcement decision-making and business planning
which involves anticipation of the Department's enforcement intent. Accordingly, the Department's
enforcement activity under Section 7 is directed primarily toward the identification and prevention of
those mergers which alter market structure in ways likely now or eventually to encourage or permit
non-competitive conduct.
In certain exceptional circumstances, however, the structural factors used in these
guidelines will not alone be conclusive, and the Department's enforcement activity will necessarily be
based on a more complex and inclusive evaluation. This is sometimes the case, for example, where
basic technological changes are creating new industries, or are significantly transforming older
industries, in such fashion as to make current market boundaries and market structure of uncertain
significance. In such unusual transitional situations application of the normal guideline standards may
be inappropriate; and on assessing probable future developments, the Department may not sue despite
nominal application of a particular guideline, or it may sue even though the guidelines, as normally
applied, do not require the Department to challenge the merger. Similarly, in the area of conglomerate
merger activity, the present incomplete state of knowledge concerning structure-conduct relationships
may preclude sole reliance on the structural criteria used in these guidelines, as explained in paragraphs
17 and 20 below.
3.Market Definition
. A rational appraisal of the probable competitive effects of a merger
normally requires definition of one or more relevant markets. A market is any grouping of sales (or
other commercial transactions) in which each of the firms whose sales are included enjoys some

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advantage in competing with those firms whose sales are not included. The advantage need not be
great, for so long as it is significant it defines an area of effective competition among the included
sellers in which the competition of the excluded sellers is, ex hypothesi, less effective. The process of
market definition may result in identification of several appropriate markets in which to test the
probable competitive effects of a particular merger.
A market is defined both in terms of its product dimension ("line of commerce") and its
geographic dimension ("section of the country").
(i)Line of commerce
. The sales of any product or service which is distinguishable
as a matter of commercial practice from other products or services will ordinarily constitute a
relevant product market, even though, from the standpoint of most purchasers, other products
may be reasonably, but not perfectly, interchangeable with it in terms of price, quality, and use.
On the other hand, the sales of two distinct products to a particular group of purchasers can
also appropriately be grouped into a single market where the two products are reasonably inter-
changeable for that group in terms of price, quality, and use. In this latter case, however, it may
be necessary also to include in that market the sales of one or more other products which are
equally interchangeable with the two products in terms of price, quality, and use from the
standpoint of that group of purchasers for whom the two products are interchangeable.
The reasons for employing the foregoing definitions may be stated as follows. In
enforcing Section 7 the Department seeks primarily to prevent mergers which change market
structure in a direction likely to create a power to behave non-competitively in the production
and sale of any particular product, even though that power will ultimately be limited, though not
nullified, by the presence of other similar products that, while reasonably interchangeable, are
less than perfect substitutes. It is in no way inconsistent with this effort also to pursue a policy
designed to prohibit mergers between firms selling distinct products where the result of the

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merger may be to create or enhance the companies' market power due to the fact that the
products, though not perfectly substitutable by purchasers, are significant enough alternatives
to constitute substantial competitive influences on the production, development or sale of each.
(ii) Section of the Country. The total sales of a product or service in any commercially
significant section of the country (even as small as a single community), or aggregate of such
sections, will ordinarily constitute a geographic market if firms engaged in selling the product
make significant sales of the product to purchasers in the section or sections. The market need
not be enlarged beyond any section meeting the foregoing test unless it clearly appears that
there is no economic barrier (e.g.
, significant transportation costs, lack of distribution facilities,
customer inconvenience, or established consumer preference for existing products) that hinders
the sale from outside the section to purchasers within the section; nor need the market be
contracted to exclude some portion of the product sales made inside any section meeting the
foregoing test unless it clearly appears that the portion of sales in question is made to a group
of purchasers separated by a substantial economic barrier from the purchasers to whom the rest
of the sales are made.
Because data limitations or other intrinsic difficulties will often make precise delineation
of geographic markets impossible, there may often be two or more groupings of sales which
may reasonably be treated as constituting a relevant geographic market. In such circumstances,
the Department believes it to be ordinarily most consistent with the purposes of Section 7 to
challenge any merger which appears to be illegal in any reasonable geographic market, even
though in another reasonable market it would not appear to be illegal.
The market is ordinarily measured primarily by the dollar value of the sales or other
transactions (e.g.
, shipments, leases) for the most recent twelve month period for which the
necessary figures for the merging firms and their competitors are generally available. Where
such figures are clearly unrepresentative, a different period will be used. In some markets, such

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as commercial banking, it is more appropriate to measure the market by other indicia, such as
total deposits.
I. HORIZONTAL MERGERS
4.Enforcement Policy
. With respect to mergers between direct competitors (i.e., horizontal
mergers), the Department's enforcement activity under Section 7 of the Clayton Act has the following
interrelated purposes: (i) preventing elimination as an independent business entity of any company
likely to have been a substantial competitive influence in a market; (ii) preventing any company or
small group of companies from obtaining a position of dominance in a market; (iii) preventing signifi-
cant increases in concentration in a market; and (iv) preserving significant possibilities for eventual
deconcentration in a concentrated market.
In enforcing Section 7 against horizontal mergers, the Department accords primary significance
to the size of the market share held by both the acquiring and the acquired firms. ("Acquiring firm"
and "acquired firm" are used herein, in the case of horizontal mergers, simply as convenient desig-
nations of the firm with the larger market share and the firm with the smaller share, respectively, and
do not refer to the legal form of the merger transaction.) The larger the market share held by the
acquired firm, the more likely it is that the firm has been a substantial competitive influence in the
market or that concentration in the market will be significantly increased. The larger the market share
held by the acquiring firm, the more likely it is that an acquisition will move it toward, or further
entrench it in, a position of dominance or of shared market power. Accordingly, the standards most
often applied by the Department in determining whether to challenge horizontal mergers can be stated
in terms of the sizes of the merging firms' market shares.

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5. Market Highly Concentrated. In a market in which the shares of the four largest firms
amount to approximately 75% or more, the Department will ordinarily challenge mergers between
firms accounting for, approximately, the following percentages of the market:
Acquiring FirmAcquired Firm
4%4% or more
10%2% or more
15% or more1% or more
(Percentages not shown in the above table should be interpolated proportionately to the percentages
that are shown.)
6.Market Less Highly Concentrated
. In a market in which the shares of the four largest firms
amount to less than approximately 75%, the Department will ordinarily challenge mergers between
firms accounting for, approximately, the following percentages of the market:
Acquiring Firm
Acquired Firm
5%5% or more
10%4% or more
15%3% or more
20%2% or more
25% or more1% or more
(Percentages not shown in the above table should be interpolated proportionately to the percentages
that are shown.)
7.Market With Trend Toward Concentration
. The Department applies an additional, stricter
standard in determining whether to challenge mergers occurring in any market, not wholly
unconcentrated, in which there is a significant trend toward increased concentration. Such a trend is
considered to be present when the aggregate market share of any grouping of the largest firms in the
market from the two largest to the eight largest has increased by approximately 7% or more of the
market over a period of time extending from any base year 5-10 years prior to the merger (excluding

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any year in which some abnormal fluctuation in market shares occurred) up to the time of the merger.
The Department will ordinarily challenge any acquisition, by any firm in a grouping of such largest
firms showing the requisite increase in market share, of any firm whose market share amounts to
approximately 2% or more.
8.Non-Market Share Standards. Although in enforcing Section 7 against horizontal mergers
the Department attaches primary importance to the market shares of the merging firms, achievement
of the purposes of Section 7 occasionally requires the Department to challenge mergers which would
not be challenged under the market share standards of Paragraphs 5, 6, and 7. The following are the
two most common instances of this kind in which a challenge by the Department can ordinarily be
anticipated:
(a)acquisition of a competitor which is a particularly "disturbing," "disruptive," or otherwise
unusually competitive factor in the market; and
(b)a merger involving a substantial firm and a firm which, despite an insubstantial market
share, possesses an unusual competitive potential or has an asset that confers an unusual competitive
advantage (for example, the acquisition by a leading firm of a newcomer having a patent on a
significantly improved product or production process).
There may also be certain horizontal mergers between makers of distinct products regarded as
in the same line of commerce for reasons expressed in Paragraph 3(i) where some modification in the
minimum market shares subject to challenge may be appropriate to reflect the imperfect substitutability
of the two products.
9.Failing Company
. A merger which the Department would otherwise challenge will
ordinarily not be challenged if (i) the resources of one of the merging firms are so depleted and its
prospects for rehabilitation so remote that the firm faces the clear probability of a business failure, and
(ii) good faith efforts by the failing firm have failed to elicit a reasonable offer of acquisition more
consistent with the purposes of Section 7 by a firm which intends to keep the failing firm in the market.

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The Department regards as failing only those firms with no reasonable prospect of remaining viable;
it does not regard a firm as failing merely because the firm has been unprofitable a period of time, has
lost market position or failed to maintain its competitive position in some other respect, has poor
management, or has not fully explored the possibility of overcoming its difficulties through self-help.
In determining the applicability of the above standard to the acquisition of a failing division of a
multi—market company, such factors as the difficulty in assessing the viability of a portion of a
company, the possibility of arbitrary accounting practices, and the likelihood that an otherwise healthy
company can rehabilitate one of its parts, will lead the Department to apply this standard only in the
clearest of circumstances.
10.Economies
. Unless there are exceptional circumstances, the Department will not accept
as a justification for an acquisition normally subject to challenge under its horizontal merger standards
the claim that the merger will produce economies (i.e., improvements in efficiency) because, among
other reasons, (i) the Department's adherence to the standards will usually result in no challenge being
made to mergers of the kind most likely to involve companies operating significantly below the size
necessary to achieve significant economies of scale; (ii) where substantial economies are potentially
available to a firm, they can normally be realized through internal expansion; and (iii) there usually are
severe difficulties in accurately establishing the existence and magnitude of economies claimed for a
merger.
II.VERTICAL MERGERS
11.Enforcement Policy
. With respect to vertical mergers (i.e., acquisitions "backward" into
a supplying market or "forward" into a purchasing market), the Department's enforcement activity
under Section 7 of the Clayton Act, as in the merger field generally, is intended to prevent changes in
market structure that are likely to lead over the course of time to significant anticompetitive
consequences. In general, the Department believes that such consequences can be expected to occur

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whenever a particular vertical acquisition, or series of acquisitions, by one or more of the firms in a
supplying or purchasing market, tends significantly to raise barriers to entry in either market or to
disadvantage existing non-integrated or partly integrated firms in either market in ways unrelated to
economic efficiency. (Barriers to entry are relatively stable market conditions which tend to increase
the difficulty of potential competitors' entering the market as new sellers and which thus tend to limit
the effectiveness of the potential competitors both as a restraint upon the behavior of firms in the
market and as a source of additional actual competition.)
Barriers to entry resting on such factors as economies of scale in production and distribution
are not questionable as such. But vertical mergers tend to raise barriers to entry in undesirable ways,
particularly the following: (i) by foreclosing equal access to potential customers, thus reducing the
ability of non-integrated firms to capture competitively the market share needed to achieve an efficient
level of production, or imposing the burden of entry on an integrated basis (i.e.
, at both the supplying
and purchasing levels) even though entry at a single level would permit efficient operation; (ii) by
foreclosing equal access to potential suppliers, thus either increasing the risk of a price or supply
squeeze on the new entrant or imposing the additional burden of entry as an integrated firm; or (iii)
by facilitating promotional product differentiation, when the merger involves a manufacturing firm's
acquisition of firms at the retail level. Besides impeding the entry of new sellers, the foregoing
consequences of vertical mergers, if present, also artificially inhibit the expansion of presently
competing sellers by conferring on the merged firm competitive advantages, unrelated to real
economies of production or distribution, over non-integrated or partly integrated firms. While it is
true that in some instances vertical integration may raise barriers to entry or disadvantage existing
competitors only as the result of the achievement of significant economies of production or distribution
(as, for example, where the increase in barriers is due to achievement of economies of integrated
production through an alteration of the structure of the plant as well as of the firm), integration
accomplished by a large vertical merger will usually raise entry barriers or disadvantage competitors

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to an extent not accounted for by, and wholly disproportionate to, such economies as may result from
the merger.
It is, of course, difficult to identify with precision all circumstances in which vertical mergers
are likely to have adverse effects on market structure of the kinds indicated in the previous paragraph.
The Department believes, however, that the most important aims of its enforcement policy on vertical
mergers can be satisfactorily stated by guidelines framed primarily in terms of the market shares of the
merging firms and the conditions of entry which already exist in the relevant markets. These factors
will ordinarily serve to identify most of the situations in which any of the various possible adverse
effects of vertical mergers may occur and be of substantial competitive significance. With all vertical
mergers it is necessary to consider the probable competitive consequences of the merger in both the
market in which the supplying firm sells and the market in which the purchasing firm sells, although
a significant adverse effect in either market will ordinarily result in a challenge by the Department.
("Supplying firm" and "purchasing firm," as used herein, refer to the two parties to the vertical merger
transaction, the former of which sells a product in a market in which the latter buys that product.)
12. Supplying Firm's Market
. In determining whether to challenge a vertical merger on the
ground that it may significantly lessen existing or potential competition in the supplying firm's market,
the Department attaches primary significance to (i) the market share of the supplying firm, (ii) the
market share of the purchasing firm or firms, and (iii) the conditions of entry in the purchasing firm's
market. Accordingly, the Department will ordinarily challenge a merger or series of mergers between
a supplying firm, accounting for approximately 10% or more of the sales in its market, and one or
more purchasing firms, accounting in
toto for approximately 6% or more of the total purchases in that
market, unless it clearly appears that there are no significant barriers to entry into the business of the
purchasing firm or firms.
13. Purchasing Firm's Market
. Although the standard of paragraph 12 is designed to identify
vertical mergers having likely anticompetitive effects in the supplying firm's market, adherence by the

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Department to that standard will also normally result in challenges being made to most of the vertical
mergers which may have adverse effects in the purchasing firm's market (i.e., that market comprised
of the purchasing firm and its competitors engaged in resale of the supplying firm's product or in the
sale of a product whose manufacture requires the supplying firm's product) since adverse effects in the
purchasing firm's market will normally occur only as the result of significant vertical mergers involving
supplying firms with market shares in excess of 10%. There remain, however, some important
situations in which vertical mergers which are not subject to challenge under paragraph 12 (ordinarily
because the purchasing firm accounts for less than 6% of the purchases in the supplying firm's market)
will nonetheless be challenged by the Department on the ground that they raise entry barriers in the
purchasing firm's market, or disadvantage the purchasing firm's competitors, by conferring upon the
purchasing firm a significant supply advantage over unintegrated or partly integrated existing
competitors or over potential competitors. The following paragraph sets forth the enforcement
standard governing the most common of these situations.
If the product sold by the supplying firm and its competitors is either a complex one in which
innovating changes by the various suppliers have been taking place, or is a scarce raw material or -
other product whose supply cannot be readily expanded to meet increased demand, the merged firm
may have the power to use any temporary superiority, or any shortage, in the product of the supplying
firm to put competitors of the purchasing firm at a disadvantage by refusing to sell the product to them
(supply squeeze) or by narrowing the margin between the price at which it sells the product to the
purchasing firm's competitors and the price at which the end-product is sold by the purchasing firm
(price squeeze). Even where the merged firm has sufficient market power to impose a squeeze, it may
well not always be economically rational for it actually to do so; but the Department believes that the
increase in barriers to entry in the purchasing firm's market arising simply from the increased risk of
a possible squeeze is sufficient to warrant prohibition of any merger between a supplier possessing
significant market power and a substantial purchaser of any product meeting the above description.

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Accordingly, where such a product is a significant feature or ingredient of the end-product
manufactured by the purchasing firm and its competitors, the Department will ordinarily challenge a
merger or series of mergers between a supplying firm, accounting for approximately 20% or more of
the sales in its market, and a purchasing firm or firms, accounting in toto for approximately 10% or
more of the sales in the market in which it sells the product whose manufacture requires the supplying
firm's product.
14. Non-Market Share Standards
.
(a) Although in enforcing Section 7 against vertical mergers the Department attaches primary
importance to the market shares of the merging firms and the conditions of entry in the relevant
markets, achievement of the purposes of Section 7 occasionally requires the Department to challenge
mergers which would not be challenged under the market share standards of paragraphs 12 and 13.
Clearly the most common instances in which challenge by the Department can ordinarily be anticipated
are acquisitions of suppliers or customers by major firms in an industry in which (i) there has been, or
is developing, a significant trend toward vertical integration by merger such that the trend, if unchal-
lenged, would probably raise barriers to entry or impose a competitive disadvantage on unintegrated
or partly integrated firms, and (ii) it does not clearly appear that the particular acquisition will result
in significant economies of production or distribution unrelated to advertising or other promotional
economies.
(b) A less common special situation in which a challenge by the Department can ordinarily be
anticipated is the acquisition by a firm of a customer or supplier for the purpose of increasing the
difficulty of potential competitors in entering the market of either the acquiring or acquired firm, or
for the purpose of putting competitors of either the acquiring or acquired firm at an unwarranted
disadvantage.
15. Failing Company
. The standards set forth in paragraph 9 are applied by the Department in
determining whether to challenge a vertical merger.

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16. Economies. Unless there are exceptional circumstances, and except as noted in paragraph
14(a), the Department will not accept as a justification for an acquisition normally subject to challenge
under its vertical merger standards the claim that the merger will produce economies, because, among
other reasons, (i) where substantial economies of vertical integration are potentially available to a firm,
they can normally be realized through internal expansion into the supplying or purchasing market, and
(ii) where barriers prevent entry into the supplying or purchasing market by internal expansion, the
Department's adherence to the vertical merger standards will in any event usually result in no challenge
being made to the acquisition of a firm or firms of sufficient size to overcome or adequately minimize
the barriers to entry.
III.CONGLOMERATE MERGERS
17.Enforcement Policy
. Conglomerate mergers are mergers that are neither horizontal nor
vertical as those terms are used in sections I and II, respectively, of these guidelines. (It should be
noted that a market extension merger, i.e., one involving two firms selling the same, product, but in
different geographic markets, is classified as a conglomerate merger.) As with other kinds of mergers,
the purpose of the Department's enforcement activity regarding conglomerate mergers is to prevent
changes in market structure that appear likely over the course of time to cause a substantial lessening
of the competition that would otherwise exist or to create a tendency toward monopoly.
At the present time, the Department regards two categories of conglomerate mergers as having
sufficiently identifiable anticompetitive effects as to be the subject of relatively specific structural
guidelines: mergers involving potential entrants (Paragraph 18) and mergers creating a danger of
reciprocal buying (Paragraph 19).
Another important category of conglomerate mergers that will frequently be the subject of
enforcement action--mergers which for one or more of several reasons threaten to entrench or enhance
the market power of the acquired firm--is described generally in Paragraph 20.

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As Paragraph 20 makes clear, enforcement action will also be taken against still other types of
conglomerate mergers that on specific analysis appear anticompetitive. The fact that, as yet, the
Department does not believe it useful to describe such other types of mergers in terms of a few major
elements of market structure should in no sense be regarded as indicating that enforcement action will
not be taken. Nor is it to be assumed that mergers of the type described in Paragraphs 18 and 19, but
not covered by the specific rules thereof, may not be the subject of enforcement action if specific
analysis indicates that they appear anticompetitive.
18.Mergers Involving Potential Entrants
.
(a)Since potential competition (i.e., the threat of entry, either through internal expansion or
through acquisition and expansion of a small firm, by firms not already or only marginally in the
market) may often be the most significant competitive limitation on the exercise of market power by
leading firms, as well as the most likely source of additional actual competition, the Department will
ordinarily challenge any merger between one of the most likely entrants into the market and:
(i) any firm with approximately 25% or more of the market;
(ii) one of the two largest firms in a market in which the shares of the two largest firms
amount to approximately 50% or more;
(iii) one of the four largest firms in a market in which the shares of the eight largest firms
amount to approximately 75% or more, provided the merging firm's share of the market amounts to
approximately 10% or more; or
(iv) one of the eight largest firms in a market in which the shares of these firms amount
to approximately 75% or more, provided either (A) the merging firm's share of the market is not
insubstantial and there are no more than one or two likely entrants into the market, or (B) the merging
firm is a rapidly growing firm.
In determining whether a firm is one of the most likely potential entrants into a market, the
Department accords primary significance to the firm's capability of entering on a competitively signifi-

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cant scale relative to the capability of other firms (i.e., the technological and financial resources
available to it) and to the firm's economic incentive to enter (evidenced by, for example, the general
attractiveness of the market in terms of risk and profit; or any special relationship of the firm to the
market; or the firm's manifested interest in entry; or the natural expansion pattern of the firm; or the
like).
(b)The Department will also ordinarily challenge a merger between an existing competitor
in a market and a likely entrant, undertaken for the purpose of preventing the competitive
"disturbance" or "disruption" that such entry might create.
(c)Unless there are exceptional circumstances, the Department will not accept as a
justification for a merger inconsistent with the standards of this paragraph 18 the claim that the merger
will produce economies, because, among other reasons, the Department believes that equivalent
economies can be normally achieved either through internal expansion or through a small firm acqui-
sition or other acquisition not inconsistent with the standards herein.
19.Mergers Creating Danger of Reciprocal Buying
.
(a)Since reciprocal buying (i.e., favoring one's customer when making purchases of a product
which is sold by the customer) is an economically unjustified business practice which confers a
competitive advantage on the favored firm unrelated to the merits of its product, the Department will
ordinarily challenge any merger which creates a significant danger of reciprocal buying. Unless it
clearly appears that some special market factor makes remote the possibility that reciprocal buying
behavior will actually occur, the Department considers that a significant danger of reciprocal buying
is present whenever approximately 15% or more of the total purchases in a market in which one of
the merging firms ("the selling firm") sells are accounted for by firms which also make substantial sales
in markets where the other merging firm ("the buying firm") is both a substantial buyer and a more
substantial buyer than all or most of the competitors of the selling firm.

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(b)The Department will also ordinarily challenge (i) any merger undertaken for the purpose
of facilitating the creation of reciprocal buying arrangements, and (ii) any merger creating the
possibility of any substantial reciprocal buying where one (or both) of the merging firms has within the
recent past, or the merged firm has after consummation of the merger, actually engaged in reciprocal
buying, or attempted directly or indirectly to induce firms with which it deals to engage in reciprocal
buying, in the product markets in which the possibility of reciprocal buying has been created.
(c)Unless there are exceptional circumstances, the Department will not accept as a
justification for a merger creating a significant danger of reciprocal buying the claim that the merger
will produce economies, because, among other reasons, the Department believes that in general
equivalent economies can be achieved by the firms involved through other mergers not inconsistent
with the standards of this paragraph 19.
20.Mergers Which Entrench Market Power and Other Conglomerate Mergers
.
The Department will ordinarily investigate the possibility of anticompetitive consequences, and
may in particular circumstances bring suit, where an acquisition of a leading firm in a relatively
concentrated or rapidly concentrating market may serve to entrench or increase the market power of
that firm or raise barriers to entry in that market. Examples of this type of merger include: (i) a merger
which produces a very large disparity in absolute size between the merged firm and the largest
remaining firms in the relevant markets, (ii) a merger of firms producing related products which may
induce purchasers, concerned about the merged firm's possible use of leverage, to buy products of the
merged firm rather than those of competitors, and (iii) a merger which may enhance the ability of the
merged firm to increase product differentiation in the relevant markets.
Generally speaking, the conglomerate merger area involves novel problems that have not yet
been subjected to as extensive or sustained analysis as those presented by horizontal and vertical
mergers. It is for this reason that the Department's enforcement policy regarding the foregoing
category of conglomerate mergers cannot be set forth with greater specificity. Moreover, the

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conglomerate merger field as a whole is one in which the Department considers it necessary, to a
greater extent than with horizontal and vertical mergers, to carry on a continuous analysis and study
of the ways in which mergers may have significant anticompetitive consequences in circumstances
beyond those covered by these guidelines. For example, the Department has used Section 7 to prevent
mergers which may diminish long-run possibilities of enhanced competition resulting from
technological developments that may increase interproduct competition between industries whose
products are presently relatively imperfect substitutes. Other areas where enforcement action will be
deemed appropriate may also be identified on a case-by-case basis; and as the result of continuous
analysis and study the Department may identify other categories of mergers that can be the subject of
specific guidelines.
21.Failing Company
. The standards set forth in paragraph 9 are normally applied by the
Department in determining whether to challenge a conglomerate merger, except that in marginal cases
involving the application of Paragraph 18(a)(iii) and (iv) the Department may deem it inappropriate
to sue under Section 7 even though the acquired firm is not "failing" in the strict sense.