Course:  Antitrust Law

Since 1982, the U.S. Department of Justice, the Federal Trade Commission, and state attorneys general have used the Herfindahl-Hirschman Index (HHI) to measure market concentration for purposes of antitrust enforcement.  The HHI of a market is calculated by summing the squares of the percentage market shares held by the respective firms.  For example, an industry consisting of two firms with market shares of 70% and 30% has an HHI of 70²+30², or 5800.

According to the DOJ-FTC 2023 Horizontal Merger Guidelines, the agencies will regard a market in which the post-merger HHI is above 1800 as "highly concentrated."  A merger that increases the HHI by more than 100 points and results in a highly concentrated market or a market share for the merged firm of greater than 30% is presumed to "substantially lesson competitiion or tend to create a monopoly."

The form below provides a convenient worksheet for the calculation of the HHI statistic under various scenarios that are commonly considered during the agencies' merger reviews.  Up to 20 company names and sales figures may be entered, and any set of companies may be selected as parties to a proposed merger.  Because market definition is a frequently contested fact in antitrust analysis, the form also provides the option to select any set of companies to exclude from the calculation.

-- Andrew Chin
March 2001 (revised December 2010)

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