Markets Wired

Delivering the keynote address at the American Bar Association (ABA) Antitrust Section’s 2007 Fall Forum today, Federal Trade Commission Chairman Deborah Platt Majoras announced that the agency will host a one-day workshop in early February 2008 in Washington, DC, to examine the application of unilateral effects theory to mergers of firms that sell competing, but differentiated products.

Unilateral Effects Theory

“Unilateral effects” as a formal theory of competitive harm was added to the joint FTC/DOJ Horizontal Merger Guidelines in 1992. The theory recognizes that, in some instances, mergers may create or enhance market power by allowing the merged firm to profitably raise prices, without accommodation of other rival market incumbents. While section 2.2 of the Guidelines explains that unilateral competitive effects can arise in a variety of different settings, the most common application of the theory is in differentiated product markets, where the products sold by different market participants are imperfect substitutes for one another.

The Workshop Structure

In examining how unilateral effects may or may not lead to competitive harm following a merger, the February workshop will address the foundations of unilateral effects theory, the challenges of market definition in differentiated product cases, judicial perspectives on unilateral effects theory, and the practicalities of evidentiary production.

In the near-future, the Commission will provide more details about the workshop, including a preliminary agenda. Copies of the Chairman’s keynote address in which she announced the workshop can be found on the FTC’s Web site and as a link to this press release.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.