Citation: 15 U.S.C. § 18 (as amended by the Celler-Kefauver Act of 1950)
Prohibits acquisitions of stock or assets where the effect may be substantially to lessen competition, or to tend to create a monopoly in any line of commerce in any section of the country.
Key Features
“May be” standard — forward-looking, probabilistic; does not require proof that competition has already been harmed
Covers horizontal mergers (competitors), vertical mergers (supplier-customer), and conglomerate mergers
Applies to acquisitions of both stock and assets
Hart-Scott-Rodino Act (§ 7A) — pre-merger notification for transactions above thresholds; substantive § 7 analysis is separate
The Celler-Kefauver amendment (1950) closed the asset-acquisition loophole and extended coverage beyond stock acquisitions
Scope of Coverage
Merger Type
Description
Horizontal
Merging parties compete in the same relevant market
No competitive relationship; may raise potential competition concerns
Merger Analysis Framework
1. Market Definition
Product market: reasonable interchangeability of use (cross-elasticity of demand); SSNIP test
Geographic market: area of effective competition
2. Market Concentration — HHI
The Herfindahl-Hirschman Index (HHI) is the primary concentration measure: sum of squares of each firm’s market share.
Post-Merger HHI
Change in HHI
Presumption
< 1,500
Any
Unlikely to be challenged (“unconcentrated”)
1,500–2,500
< 100
Unlikely to be challenged
1,500–2,500
≥ 100
Potentially raises significant concerns
> 2,500
< 100
Unlikely to be challenged
> 2,500
100–200
Potentially raises significant concerns
> 2,500
≥ 200
Presumptively anticompetitive
3. Competitive Effects
Unilateral effects: merged firm can profitably raise prices without coordinated action
Coordinated effects: merger facilitates collusion among remaining competitors
4. Entry
Entry must be timely (within 2 years), likely, and sufficient to deter or counteract anticompetitive effects
5. Efficiencies
Cognizable if merger-specific, verifiable, and outweigh competitive harm; not a defense to structural presumption of illegality in most circuits
6. Failing Firm Defense
Strict requirements: (1) firm unable to meet financial obligations; (2) unable to reorganize in bankruptcy; (3) good-faith unsuccessful effort to find alternative acquirer; (4) absent merger, assets would exit the market
Burden Shifting Framework
Government’s prima facie case: Establish market definition and show significant increase in concentration (high post-merger HHI + large delta → presumption of illegality per United States v. Philadelphia National Bank)
Burden shifts to merging parties: Rebut with evidence that HHI overstates harm, or that procompetitive benefits outweigh harms (ease of entry, buyer power, efficiencies)
Government’s rebuttal: May respond to efficiencies claims or rebut defendants’ evidence
Defenses
Efficiencies Defense
Must be (1) merger-specific, (2) verifiable, (3) substantial enough to benefit consumers