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Which merger would the Antitrust Division challenge? Why?

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Suppose an industry is composed of eight firms with the following market shares:
A 30% E 8%
B 25 F 5
C 15 G 4
D 10 H 3
Based on the (revised 1997) merger guidelines, would the Anitrust Division likely challenge a proposed merger between
a. Firms C and D (assume the combined market share is 25 percent)?
b. Firms F and G (assume the combined market share is 9 percent)?
Explain your answer.

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Solution Preview

The Antitrust Division's 1997 guidelines can be found at http://www.justice.gov/atr/hmerger/11251.htm
The relevant section is 1.5 - Concentration and Market Shares. The Antitrust Division uses the Herfindahl-Hirschman Index (HHI) of market ...

Solution Summary

This solution uses the Antitrust Division's published guidelines to determine which of two proposed mergers would be challenged under antitrust law. There is a link to the Antitrust Division's guidelines, references to the relevant sections, and a file showing the HHI calculations that the Division would make.