The Horizontal Merger Guidelines for the U.S. Department of Justice and the Federal Trade

Commission lay the rules regarding whether a merger should be allowed or not. According to the guideline, for a post-merger Herfindahl-Hirschman Index (HHI) Below 1000, the markets are considered to be unconcentrated. Mergers resulting in unconcentrated markets are unlikely to have adverse competitive effects and ordinarily require no further analysis. For a post-merger HHI Between 1000 and 1800, the markets are considered to be moderately concentrated. Mergers producing an increase in the HHI of more than 100 points in moderately concentrated markets post-merger potentially raise significant competitive concerns and are not usually permitted. For a post-merger HHI Above 1800, the agency regards markets in this region to be highly concentrated. Mergers producing an increase in the HHI of less than 50 points, even in highly concentrated markets post-merger, are unlikely to have adverse competitive consequences and ordinarily require no further analysis. Mergers producing an increase in the HHI of more than 50 points in highly concentrated markets post-merger potentially raise significant competitive concerns. And if the post-merger HHI exceeds 1800, it will be presumed that mergers producing an increase in the HHI of more than 100 points are likely to create or enhance market power or facilitate its exercise. Such a merger will likely not be approved.

(Source: https://www.justice.gov/atr/horizontal-merger-guidelines-0#15)

Given below is the sales (in millions of US dollar) of eight cellular service providers. Now, as a

strategic move, Z mobile and Ring decideto merge into a combined entity. Do you think the merger would be approved?

(Hint: Find market share and HHI before and after the merger and compare.)

NameSales (in Million $)Amazing cellular567. 8Ring1390. 5Redstar Cellular252.8Z mobile2127.7 Total Cellular798.4Pacific2310.7Highland Mobile802.3DNO134.8