In 2015, the Department of Justice (DOJ) complained against competing firms Electrolux and General Electric.

• In the United States, the complaint alleged that Electrolux North America made and sold major cooking appliances totaling approximately $770 million per year.
• One of its major competitors, General Electric, made and sold major cooking appliances with sales totaling about $1.1 billion in its US market.
• On September 7, 2014, Electrolux agreed to acquire from General Electric Company and its subsidiaries assets relating to General Electric's appliance business. Electrolux agreed to pay General Electric $3.3 billion for these assets.

The DOJ alleged that the proposed acquisition would eliminate competition between Electrolux and General Electric and significantly increase concentration in already concentrated markets. According to DOJ estimates, post-acquisition HHI values would be above 2,500 points, and attention would increase by considerably more than 200 points, whether measured by the amount of money each appliance supplier received from those sales (revenues) or the quantity of each appliance sold (units). The sale of appliances is dominated by three manufacturers: Electrolux, Whirlpool, and General Electric. These manufacturers sell major cooking appliances through two principal sales channels: retail and contract. In both channels, Electrolux and General Electric compete with each other.

Assume that you are a senior financial manager of General Electric and have been charged with aiding attorneys defending your firm against an injunction filed by the DOJ enjoining your firm to cease actions currently being undertaken to merge with an industry rival. Given your understanding of the economic basis for a merger, what mitigating factors do you think should be considered which might justify this merger? Use arguments developed in Chapters 7 and 8 to defend your position.

As a senior financial manager of General Electric presenting to other executive team members, consider the economic basis for a merger and do the following.

1. Demonstrate mitigating factors that justify this merger.
2. Demonstrate factors that mitigate the reliability of DOJ estimates of industry concentration.