The blog title is referred to as the HHI. It is, according to the DOJ complaint against ATT, a commonly accepted measure of market concentration. The HHI is calculated by squaring the market share of each firm in the market and then summing the resulting numbers. For example, in a market with four firms with shares of 30, 30, 20 and 20 percent, the HHI is 2600 (900 + 900 + 400 + 400).
Markets in which the HHI is between 1,500 and 2,500 points are considered to be moderately concentrated, and markets in which the HHI is in excess of 2,500 are considered to be highly concentrated. The DOJ has issued a series of horizontal merger guidelines. For example, mergers that increase the HHI more than 200 points are presumed to enhance market power. According to the complaint, the ATT purchase of T-mobile increases the HHI more than 700 points. These numbers substantially increase the thresholds at which mergers are presumed to be likely to enhance market power. Ergo, the core of the DOJ suit.
My estimate is that millions of dollars, billions from the point of view of ATT, are hinged on the squaring of market shares and summing these numbers to determine a violation of the HHI guidelines. In the DOJ complaint, the HHI is calculated for 100 different markets. I live in the Kansas City market, the HHI skyrockets post merger. I am in trouble. Out of hundred markets, it appears that Cincinnati and Milwaukee are safe.
I find this market share squaring notion fascinating. But remember, I like reading the tax code.
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