Most observers seem to believe the clearance of the AT&T acquisition of Time Warner (a vertical merger) clears the way for other big mergers, and that, in general, is likely correct.
But there still will be more scrutiny of horizontal mergers that increase market concentration. Among the tools used by the Department of Justice when evaluating horizontal mergers that reduce the number of competitors is the Herfindahl-Hirschman Index (HHI), a quantitative measure of market concentration.
Basically, the HHI quantifies changes in market share after a proposed horizontal merger. Generally speaking, any mergers that increase concentration by 300 points or more will trigger an automatic review. And markets where concentration already is deemed “highly concentrated” are almost certain to trigger a review. The U.S. mobile industry already is deemed highly concentrated, though less so than many other markets.
The proposed merger of Sprint and T-Mobile US will result in an HHI increase of over 350 points, boosting mobile market HHI scores to 3,250, says Cheenu Seshadri, Three Horizon Advisors managing partner.
Since U.S. market concentration already is at levels that normally would trigger antitrust review virtually automatically, a review is certain.
DOJ and FTC Guideline for Assessing Market Concentration and Challenging Merger Proposals
Furthermore, the market concentration in key sub-segments is likely to increase even further. The Sprint T-Mobile US merger would have significant impact in the prepaid and wholesale segments of the market, for example.
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