In a media management class I took last semester, we had frequent discussion about the FTC and consolidation and monopolies. People spouted lots of opinions based on such assertions as, "the government doesn't allow companies to hurt other companies or drive them out of business!"
I frequently countered that making a better product can really hurt other companies and even drive them out of business. Some students suggested that monopolies are illegal -- again, I countered that monopolies are not illegal, only certain, specific tactics that lead to the formation of monopolies.
Debate raged (politely, for the most part) all semester with few of us becoming any more informed on the actual process underlying the whole issue. How does the government decide when to get involved? What factors does the government look at?
Well, then I ran into this: an actual FTC document outlining their decision process on a merger from back in 2000. Apparently there are actually thousands of these, but I'd never seen one before. It's even meant to be human-readable, so I'd highly recommend checking it out.
If, that is, you care about anti-competitive behavior and government regulation. Which normal people don't care about.
http://www.ftc.gov/os/2000/12/valsparana.htm
A few choice quotes are after the jump, but I really recommend you read the whole thing! It's short and fascinating.
The United States mirror solutions and mirror backing paint markets are highly concentrated, and the proposed acquisition would produce a firm controlling over 90% of the mirror solutions markets and over 60% of the mirror backing paint market. Both companies have frequently competed against each other for customers. By eliminating competition between the two most significant competitors in these highly concentrated markets, the proposed acquisition would allow the combined firm to exercise market power unilaterally, thereby increasing the likelihood that purchasers of mirror solutions as well as mirror backing paint would be forced to pay higher prices and that innovation and service levels in these markets would decrease.
Significant impediments to new entry exist in the mirror solutions and mirror backing paint markets. A new entrant into any of these markets would need to undertake the difficult, expensive and time-consuming process of developing a competitive product, establishing reliable U.S. distribution and technical support, and developing a reputation among mirror manufacturers for consistently producing a high-quality product. Because of the difficulty of accomplishing these tasks, new entry into either the mirror solutions markets or the mirror backing paint market could not be accomplished in a timely manner. Additionally, new entry into any one of these markets is made more unlikely because of the limited sales opportunities available to new entrants.
The Commission's goal in evaluating possible purchasers of divested assets is to maintain the competitive environment that existed prior to the acquisition.