What are Merger Guidelines?

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  • Written By: Karize Uy
  • Edited By: Lauren Fritsky
  • Last Modified Date: 15 March 2020
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Merger guidelines are a collection of rules and regulations that oversee any mergers between and among companies. Both the Federal Trade Commission (FTC) and the Antitrust Division under the US Department of Justice (DOJ) rely on these guidelines to analyze and investigate companies planning future mergers. The guidelines ensure that companies in the US abide by the antitrust law and encourage a healthy competition in the market.

Dr. Donald Turner, a former US Assistant Attorney General, was the first to conceive of the merger guidelines back in 1968. The prime contribution of this first version was to introduce the concept of “Structure Conduct Performance” in analyzing the market, stating that market performance depends on the market conduct, which then hinges on the market structure. Since then, the merger guidelines have undergone several revisions, the first of which occurred in 1982.

Associate Attorney General Bill Baxter spearheaded the revision and introduced the use of the Herfindahl Index, which measures the relationship of the market size concentration and the size of a company. Under the new revision, the guidelines also supported “production efficiency” as a sound reason for a merger. In this way, many economists and entrepreneurs changed their perspectives by seeing competition in a positive way in that it can create better product and services for the public. Other revisions were carried out in 1984, 1992, 1997, and 2010.


The 2010 merger guidelines allotted sections both for horizontal and vertical mergers. A horizontal merger occurs when two companies that create similar products and services join together. The DOJ and the FTC use a five-tier analysis included in the guidelines to inspect the potential merger. The five-tier analysis includes collecting facts about the present market, studying the involved companies’ efficiency and stability, and supposing economic effects if the merger is accomplished. Any problems that are highly likely to occur can be grounds for challenging the merger.

A vertical merger takes place when companies that create different products and services collaborate, such as with retailers and manufacturers. Using the merger guidelines, the DOJ and the FTC can contest the merger if they find negative effects similar to what a horizontal merger can bring. These effects can include harm to “perceived potential competition”, barriers to entry, or elimination of a disruptive buyer. The Department also expects that the merger will result in a greater level of efficiency; if the expectation is not met, the merger can be challenged.


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