The main antitrust issue during the review of an M&A transaction is whether the acquisition will substantially lessen competition. Since the antitrust laws include M&A activity in the scope of potentially anticompetitive conduct. A transaction can be banned just as, for example, two companies agreeing to fix prices would be prohibited. The HSR Act was to give the Agencies the ability to review certain mergers before they are. And it imposes procedural requirements that parties are to follow before closing on those transactions. Importantly, the antitrust laws are not to pending mergers (even closed transactions illegal and thus unwound), and mergers and acquisitions that are not subject to the HSR review process. Or even the ones that have during the process, can still investigate or even declared illegal later.

At the risk of oversimplification, the Agencies will analyze how competition in the marketplace will change as a result of a transaction. Will the combined entity have market power? Can it sustain price increases? Can it slow innovation? How will other competitors react? How will consumers be harmed?

In addition to the substantive review of a transaction, the antitrust laws touch upon the submission of materials to the government, govern the timing of transactions and regulate the level of activity between parties during a transaction. This latter prong can be particularly problematic. Merging parties—especially if they are competitors—need what information is during the diligence and integration planning phases of a transaction, as well as the amount of influence one company has on the other (for example, prohibitions against the buyer may have on the seller’s ordinary course of business).

While the antitrust laws certainly understand that increased coordination during M&A activity is necessary and beneficial. This doesn’t mean that parties can coordinate all their behavior under the guise of a pending merger. Perceived violations can result in long and costly investigations, consent decrees that stipulate future conduct, monetary fines, and even criminal sanctions. For example, failing to submit a required HSR notification form can lead to fines. Transactions under HSR review are subject to waiting periods during which the parties cannot close; and egregious coordination. Such as agreeing on what prices to charge customers, during integration activities can lead to prison sentences.

The determination of market concentration can be complicated. It’s not as simple as asking who else competes with a similar product. But a good starting place is to look at the parties’ revenues in overlapping product markets and estimate the revenues for competitors as well as the overall market. One can already see how this can present an incomplete picture. What about alternative technologies? In-house capabilities? Potential entrants?

Also, there is no magic number for when a combined entity’s shares become problematic. Like many things in antitrust, the analysis depends on many factors. Certain industries can remain competitive with fewer players that have high shares, while others may require more fragmentation. The Herfindahl-Hirschman Index (HHI), offers a mathematical formula to assess concentration. Is one common measurement and can offer a starting place. But it’s not an end-all, and the Agencies are enough to know that. To be sure, high market shares or HHI figures will often portend a deeper investigation by the government, but there’s more to the picture. Merging parties should formulate—and document—an accurate picture of competitive dynamics, as well as benefits to consumers and efficiencies that will arise from a transaction.