What is merger review?
Merger review is how antitrust authorities check whether a merger or acquisition will hurt competition. When two competitors combine, prices may rise, quality may fall or innovation may slow, because customers lose an alternative. Agencies therefore look at deals above certain sizes, and they can block them, require changes such as selling off part of a business, or let them go ahead.
In the United States the core rule is Section 7 of the Clayton Act, 15 U.S.C. § 18, which bans acquisitions whose effect "may be substantially to lessen competition, or to tend to create a monopoly." The Federal Trade Commission and the Justice Department's Antitrust Division share enforcement. Korea's equivalent is the Monopoly Regulation and Fair Trade Act, enforced by the Korea Fair Trade Commission (KFTC).
- U.S. test
- May substantially lessen competition
- Filing law
- Hart-Scott-Rodino Act (1976)
- Agencies
- FTC, DOJ; in Korea, the KFTC
- Remedies
- Block the deal or require divestitures
Most mergers are never challenged. The handful that are tend to involve close rivals, concentrated markets or a big player buying a future competitor.
HSR filings and waiting periods
The Hart-Scott-Rodino Act of 1976 requires parties to report deals above a dollar threshold, adjusted every year, to both agencies before closing. The parties must then wait, usually 30 days, while the agencies take a first look. If concerns remain, an agency can issue a "second request" for documents and data, which extends the wait until the parties comply and can take months.
Closing before the waiting period ends, or coordinating as if already merged, is called gun-jumping and can bring civil penalties. The FTC adopted a revised HSR form in 2024 that asks for more information about overlaps and deal rationale. Korea's system is similar: large companies must notify the KFTC, and for the biggest deals they must wait for the review, normally 30 days and extendable by up to 90 more.
How agencies judge competitive effects
Agencies start by defining the relevant market, the products and geographic area where customers could turn if prices rose. They then measure concentration, often with the Herfindahl-Hirschman Index (HHI), the sum of the squared market shares. Under the 2023 Merger Guidelines issued by the FTC and DOJ, a market with an HHI above 1,800 is highly concentrated, and a deal that raises it by more than 100 points is presumed likely to lessen competition.
Concentration is only a starting point. Agencies also look at whether the merging firms are each other's closest rivals, whether new entry is easy, whether the deal removes a potential entrant and whether a vertical deal lets the combined firm cut off rivals' access to inputs or customers. Claimed efficiencies count only if they're specific to the deal and likely to benefit customers.
- Brown Shoe v. United States (1962)
- Early guide to market definition under Section 7
- Philadelphia National Bank (1963)
- High combined shares create a presumption of harm
- 2023 Merger Guidelines
- Current FTC and DOJ framework, HHI thresholds
- Korea 2008Du9744 (2009)
- Divestiture order in a foreign carbon black deal upheld
Remedies and litigation
If an agency thinks a deal is harmful, the parties often negotiate a consent decree that requires selling overlapping plants, brands or product lines to a buyer that can keep competition alive. Structural remedies like divestitures are preferred because behavioral promises are hard to monitor. If no fix is agreed, the agency can sue in federal court to block the deal, and parties frequently abandon a deal rather than litigate.
Courts decide these cases on evidence about markets, customer behavior and internal documents. Agencies' track records vary; some high-profile challenges have succeeded, while others, especially vertical deals, have lost in court. Judicial review of agency decisions in general is covered in judicial review.
Korea's merger control and foreign deals
Korea's Fair Trade Act prohibits business combinations that substantially restrict competition (art. 9) and requires notification of covered deals (art. 11). The act has applied to conduct abroad that affects the Korean market since 2004, so deals between foreign companies with Korean sales above a threshold can be reviewed.
A well-known case involved a Korean chemical company's acquisition of a U.S. carbon black producer that owned a Korean subsidiary. The KFTC found the deal would restrict competition in Korea's rubber-grade carbon black market and ordered the sale of production assets. The Seoul High Court and the Supreme Court (2008Du9744, 2009) upheld the order, rejecting arguments that it was too late or too harsh. A Korean case comment on Korean Merger Control Case Study: Divestiture Order in a Foreign Carbon Black Acquisition, Supreme Court Case 2008Du9744 walks through the procedural and substantive issues, and a paper on Hearings and Prior Notice Before Adverse Administrative Action in Korea: Procedure Rules and a Public Procurement Bid Case explains the procedural rights that apply before an adverse administrative decision.
| United States | Korea | |
|---|---|---|
| Legal standard | May substantially lessen competition | Substantially restricts competition |
| Filing | HSR, 30-day wait | KFTC notice, 30 days plus up to 90 |
| Who decides | Agency sues in court | KFTC orders; courts review |
| Foreign deals | Covered if U.S. nexus | Covered if Korean market effect |
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Criticism and debate
Some critics say merger enforcement became too lax from the 1980s onward, allowing concentration in industries from airlines to hospitals and tech platforms that bought young rivals. Others argue tougher rules chill beneficial deals, deter startup investment because acquisitions are a common exit, and let agencies block mergers on speculation. The 2023 Guidelines' lower concentration thresholds revived this debate. Related corporate structure questions appear in piercing the corporate veil, and the consumer side of competition policy in consumer protection basics.
A merger can't be easily undone once two companies are combined. That's why merger law acts before the harm, not after.
- What is merger review in antitrust?
- It's the process by which agencies like the FTC and DOJ examine mergers and block or condition those that may substantially lessen competition.
- What is an HSR filing?
- It's the premerger notice required by the Hart-Scott-Rodino Act for deals above an annually adjusted threshold, followed by a waiting period, usually 30 days, before closing.
- What happens if regulators object to a merger?
- The parties may agree to sell off overlapping businesses, abandon the deal, or fight an agency lawsuit to block it in court.
References and official sources
- 15 U.S.C. § 18 (Clayton Act § 7). Cornell LII
- 15 U.S.C. § 18a (Hart-Scott-Rodino). Cornell LII
- Merger Guidelines (2023). U.S. Department of Justice
- Premerger Notification and the Merger Review Process. FTC
- 독점규제 및 공정거래에 관한 법률. 국가법령정보센터