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(1) evidence that buyers have shifted or have considered shifting purchases between products in
response to relative changes in price or other competitive variables;

(2) evidence that sellers base business decisions on the prospect of buyer substitution between
products in response to relative changes in price or other competitive variables;

(3) the influence of downstream competition faced by buyers in their output markets; and

(4) the timing and costs of switching products.

a) Post-Merger HHI Below 1000. The Agency regards markets in this region to be
unconcentrated. Mergers resulting in unconcentrated markets are unlikely to have adverse
competitive effects and ordinarily require no further analysis.

b) Post-Merger HHI Between 1000 and 1800. The Agency regards markets in this region to be
moderately concentrated. Mergers producing an increase in the HHI of less than 100 points in
moderately 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
100 points in moderately concentrated markets post-merger potentially raise significant competitive
concerns depending on the factors set forth in Sections 2­5 of the Guidelines.

c) 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,
depending on the factors set forth in Sections 2­5 of the Guidelines. Where 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. The presumption may
be overcome by a showing that factors set forth in Sections 2­5 of the Guidelines make it unlikely
that the merger will create or enhance market power or facilitate its exercise, in light of market
concentration and market shares.

Cognizable efficiencies are merger-specific efficiencies that have been verified and do not arise
from anticompetitive reductions in output or service. Cognizable efficiencies are assessed net of costs
produced by the merger or incurred in achieving those efficiencies.

The Agency will not challenge a merger if cognizable efficiencies are of a character and
magnitude such that the merger is not likely to be anticompetitive in any relevant market

The first step assesses whether entry can achieve significant market impact within a timely
period. If significant market impact would require a longer period, entry will not deter or counteract
the competitive effect of concern.

The second step assesses whether committed entry would be a profitable and, hence, a likely
response to a merger having competitive effects of concern. Firms considering entry that requires
significant sunk costs must evaluate the profitability of the entry on the basis of long term
participation in the market, because the underlying assets will be committed to the market until they
are economically depreciated. Entry that is sufficient to counteract the competitive effects of concern
will cause prices to fall to their premerger levels or lower. Thus, the profitability of such committed
entry must be determined on the basis of premerger market prices over the long-term.

A merger having anticompetitive effects can attract committed entry, profitable and premerger
prices, that would not have occurred premerger at these same prices. But following the merger, the
reduction in industry output and increase in prices associated with the competitive effect of concern
may allow the same entry to occur without driving market prices below premerger levels. After a
merger that results in decreased output and increased prices, the likely sales opportunities available
to entrants at premerger prices will be larger than they were premerger, larger by the output reduction
caused by the merger. If entry could be profitable at premerger prices without exceeding the likely
sales opportunities--opportunities that include pre-existing pertinent factors as well as the
merger-induced output reduction--then such entry is likely in response to the merger.

The third step assesses whether timely and likely entry would be sufficient to return market prices
to their premerger levels. This end may be accomplished either through multiple entry or individual
entry at a sufficient scale. Entry may not be sufficient, even though timely and likely, where the
constraints on availability of essential assets, due to incumbent control, make it impossible for entry
profitably to achieve the necessary level of sales. Also, the character and scope of entrants' products
might not be fully responsive to the localized sales opportunities created by the removal of direct
competition among sellers of differentiated products. In assessing whether entry will be timely,
likely, and sufficient, the Agency recognizes that precise and detailed information may be difficult
or impossible to obtain. In such instances, the Agency will rely on all available evidence bearing on
whether entry will satisfy the conditions of timeliness, likelihood, and sufficiency.

15 U.S.C. § 18 (1988). Merger subject to section 7 are prohibited if their effect "may be substantially to lessen competition, or to tend to create
a monopoly."

2. 15 U.S.C. § 1 (1988). Mergers subject to section 1 are prohibited if they constitute a "contract, combination . . . , or conspiracy in restraint of
trade."

3. 15 U.S.C. § 45 (1988). Mergers subject to section 5 are prohibited if they constitute an "unfair method of competition."