Boeing/McDonnell Douglas Merger (1997)

1
Boeing/McDonnell Douglas Merger (1997)
What was Boeings and McDonnells market
shares? Was McDonnell failing as a
company? Were there high barriers to entry? How
many other competitors were there? What was the
national champion argument? Did it work? What
was the FTCs rational for not objecting to the
merger? Why did the EC make such dire threats?
How did U.S. respond?
2
Non-Horizontal Mergers per 84 Guidlines

• Merger That Eliminates Potential Entrant.
  Analytical factors include
• Harm to perceived competition merger
  eliminates threat of new player.
• Harm to potential competition new potential
  competition gone.
• Actual competition in market will it be
  impacted?
• Market concentration the higher, the worse.
• Conditions to entry the higher, the worse.
• Merger firms entry advantage, if any.
• Market share of merger firms.
• Efficiencies.

3
Non-Horizontal Mergers per 84 Guidlines

• Vertical Mergers
• 1. Vertical merger creates objectionable barriers
  to entry if
• (a) Vertical merger requires new entrant
  must enter both markets,
• (b) Requirement to enter second market
  makes entry to primary market
• much harder or unlikely.
• (c) Structure of primary market conducive
  to non-competitive performance.
• Department unlikely to challenge if
  HHI under 1800.
• Vertical integration of retail outlets.
  Department unlikely to challenge unless HHI over
  1800 and large percentage of upstream product
  sold through vertically-integrated retail
  outlets. Fear is price and output control.
• Elimination of disruptive, competitive buyer.
  Department unlikely to challenge unless HHI over
  1800 and disruptive firms differs substantially
  from other firms in the market.

4
Private Standing to Challenge Mergers
Brunswick v. Pueblo Bowl-O-Mat, Inc. (1977) To
have standing to challenge merger, private party
must prove antitrust injury injury by reason of
what antitrust declares unlawful. Injury from
competition not antitrust injury. Cargill, Inc.
v. Monfort of Colorado, Inc. (1986) 2nd and 3rd
largest players in meat packing market merge.
5th largest player sues, alleging merger is
anticompetitive because merged entity will be
able to use price-cost squeeze (buy for more
and sell for less) to close out other
competitors. Ct. held increase competition
from tough price competition not basis for
standing to challenge suit. But, if they could
prove likelihood of predatory pricing, then may
have standing. What was governments
position in the case? What was rationale
and basis for dissent? What if a merger is
part of a plan to monopolize a market? Would
that give a competitor standing to challenge the
merger?