Question

Under what conditions might the Justice Department approve a merger between two companies that operate in an industry with a post-merger Herfindahl-Hirschman index of 2,900 if the increase in the Herfindahl-Hirschman index from the merger is 225?

Answer 1

Answer:

Explanation:

Overall an industry with a post merger Herfindahl-Hirschman index value of below 1500 is considered un-concentrated.In an extreme case,if the Herfindahl-Hirschman index in an industry exceeds 2900,it suggest that the industry is highly concentrated.

In that case if a merger is going to occur which is expected to raise the Herfindahl-Hirschman index by 255 points,then the FTC and DOJ might challenge a lawsuit against such merger,some other factor are also scrutinized.

This include economies of scale,economies of scopes and the ease in which there is an entry possible in the industry,The agencies like FTC and DOJ try to block horizontal merger if it expected to create unsuitable economic business environment for other firms in the industry