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Coordinated Effects
Ken Heyer
Economics Director
Antitrust Division
Note: The views and analysis expressed here are personal and do not necessarily reflect the views and policies of
the United States Department of Justice.
UNITED STATES DEPARTMENT OF JUSTICE
ANTITRUST DIVISION
Coordinated vs. Unilateral
Competitive Effects Analysis
a. It isn’t necessarily one or the other
b. Even in a given investigation, the
theories needn’t be mutually exclusive
The Shifting Fortunes of
Coordinated Effects Analysis
• Why did Unilateral effects become so
attractive?
• Why did Unilateral effects become so
unattractive?
• The return of Coordinated effects
Coordinated Effects: Moving
Beyond the Laundry List*
• Market concentrated on the
selling side
• No fringe of small sellers
• Inelastic demand at competitive
price
• Entry takes a long time
• Buying side of market
unconcentrated
• Standard product
• Nondurable product
• The principal firms sell at the
same level in the chain of
distribution
• Price competition more
important than other forms of
competition
• High ratio of fixed to variable
costs
• Similar cost structures and
production processes
• Demand static or declining over
time
• Prices can be changed quickly
• Sealed bidding
• Market is local
• Cooperative practices
• The industry’s antitrust“record”
*Source: Richard Posner,
Antitrust Law
Mergers and Coordinated Effects
No Effect
Harmful Effect
Beneficial Effect
• Pre-Merger
coordination and
Post-Merger
coordination the
same
• Pre-Merger
coordination made
more perfect, more
complete, or more
durable
• Market “tips” from
no coordination to
some coordination
• Pre-Merger
coordination made
less perfect, less
complete, or less
durable
• Market “tips” from
some coordination to
no coordination
a. No coordination
before. None after.
b. Some coordination
before. The same
amount of
coordination after.
The Hypothetical Case
of Cablestock
Some market basics:
• At Least a Half Dozen Active Competitors
• Homogeneous Product
• Relatively Low Current Margins
• HHI Only a Little Above 2000
• Change in HHI Less Than 500
However…
• Entry unlikely, efficiency claims weak.
• Most firms seem to be operating near capacity
• The to-be-acquired firm has lots of available
capacity and only a modest market share
Theory of Harm
• Pre-merger, three firms would need to collude
for there to be a SSNIP
• Post-merger only two needed
• Maverick firm eliminated
• Still, could/would the remaining two collude…
Lessons
• Not everyone needs to collude to effect a
SSNIP
• Maverick evidence—can be “merely”
structural
• Still need to prove cartel likely with only a
small number—the usual judgment calls re:
agreeing, monitoring, punishing
Coordinated Effects: Greater Need For
“Judgment” than with Unilateral Effects Cases?
• In both cases, consider the costs and
benefits of making “wrong” decisions