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Question
Acme Co., a widget manufacturer, is acquiring Basic, Inc., another widget manufacturer. In view of the nature of the widget industry, a manufacturer's sales territories tend to correspond closely to the states in which it has manufacturing plants. Both Acme and Basic have plants in North Carolina, South Carolina, Tennessee, and Kentucky. In addition, Acme has plants in Illinois and Indiana, and Basic has a plant in Ohio. The post-merger market share of the two firms is likely to be 5 percent in the combined North Carolina, South Carolina, Tennessee, Kentucky, Illinois, Indiana, and Ohio markets, 10 percent in the combined North Carolina, South Carolina, Tennessee, and Kentucky markets, and 32 percent in the combined North Carolina-South Carolina market, where Acme and Basic have been historically strong competitors. Which of the above markets is likely to be treated as the relevant geographic market for purposes of determining the legality of the acquisition? Why that market?
Answer
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