Demystifying the Hypothetical Monopsonist Test: Defining Buyer Markets
I. INTRODUCTION
The Hypothetical Monopsonist Test (HMNT) is an important tool for defining buyer markets, a step
in evaluating mergers or conduct that may affect buyer competition. While US agency merger
guidelines indicate that the tool is analogous to the Hypothetical Monopolist Test (HMT), the existing literature has not thoroughly detailed the critical distinctions necessary for obtaining correct
HMNT estimates.1
II. Defining Markets Around Buyers
Mergers among buyers can reduce competition for the products or services that they purchase,
harming those sellers which otherwise benefit from the competitive tension. For example, sellers
of raw or intermediate inputs may be impacted when consolidation among manufacturers reduces
competition for their products.2 Although mergers among buyers have the potential to lead to lower
prices in downstream markets, the 2023 Merger Guidelines make clear that the Agencies will not
credit such benefits against potential harms from the lost buyer competition.3
Protecting competition in buyer markets is not novel in antitrust law.4 However, merger enforcement against buyer consolidation is less frequent than for sellers. Some explanations for this
include: (i) inputs are often commodity products so antitrust markets are in many instances likely to
be broad; (ii) merger challenges are only justified by likely harm to consumers;5 and (iii) theories of harm focused on protecting seller competition might also be available for the same merger where concerns are raised for buyer competition. These protections of seller competition may be more likely to succeed and ultimately achieve the enforcer’s objective.6
Notably, under the new HSR filing rules, notifying parties are not required to disclose competitive overlaps in their purchasing, which stands in contrast to the same requirement in terms of
competitive overlaps in sales.7
This indicates that the antitrust agencies currently view buyer consolidation as a concern that is less widespread than seller consolidation. Notwithstanding, there are many instances where agencies have raised concerns about this type of competitive overlap.8
One recent example is the Canadian Competition Bureau’s assessment of the proposed Bunge
and Viterra transaction, where the Bureau raised concerns based on relevant markets defined
as the ‘Origination of grain’ (wheat and canola).9 Another example is the proposed acquisition of Simon & Schuster by competing book publisher Penguin Random House, where the US Department of Justice (DOJ) successfully persuaded the court that the transaction threatened competition in a relevant market defined around buyers of anticipated top-selling books.10
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CITATIONS
[1] A recent paper by McCrary, Olivieri and McKee (2025) addresses how the test should be applied specifically in relation to labor markets, rather than for input markets more generally. They argue that even though “[o]n the labor market side, an analogous set of standard tools or shortcuts has not yet developed . . . this does not mean the existing HMT framework cannot be applied to labor markets using standard economic evidence.” Justin McCrary, Elisa Olivieri, & Graham McKee, Applying the Hypothetical Monopsonist Test for Labor Market Definition, 1-9 Antitrust Source (May 2025), https://www.americanbar.org/groups/antitrust_law/resources/source/2025-may/ applying-hypothetical-monopsonist-test/
[2] Indeed, merger parties downstream from input suppliers sometimes cite “procurement synergies ” among the benefits expected to flow from their transaction, and this can include reduced competitive tension in purchasing. Some recent examples are: International Paper, Further statement regarding possible offer for DS Smith plc, PR Newswire (April 4, 2024), https://www.prnewswire.com/news-releases/further-statement-regarding-possible-offer-for-ds-smith-plc-302108300.html (“operational procurement synergies from increased scale”); Press Release, Knife River Completes Acquisition of Strata Corporation, SEC (March 10, 2025), https://www.sec.gov/Archives/ edgar/data/1955520/000195552025000013/exhibit991-pressreleasedat.htm; Press Release, Piedmont Lithium and Sayona Mining To Merge, Piedmont Lithium (November 19, 2024), https://www.piedmontlithium.com/piedmont-lithium-and-sayona-mining-to-merge/ (“Optimized logistics and procurement with potential to deliver lower operating costs”).
[3] See footnote 71 on p.33 of U.S. Dep’t of Justice & Federal Trade Comm’n, Merger Guidelines (Dec. 2023), (“2023 Merger Guidelines”), available at https://www.ftc.gov/system/files/ftc_gov/pdf/2023_merger_guidelines_final_12.18.2023.pdf.
[4] For an extensive survey of enforcement actions, both merger and non-merger, to protect buyer competition see C. Scott Hemphill and Nancy L. Rose, Mergers that Harm Sellers, The Yale Law Journal 2078-2109 (2018), https://www.yalelawjournal.org/pdf/HemphillRose_m2dfkbhr.pdf. (“The symmetric treatment of monopoly and monopsony in antitrust law protects the competitive process and the welfare of the merging firms’ trading partners, whether purchasers or sellers.”)
[5] See comments addressing these reasons by Marius Schwartz at a 2004 DOJ/FTC Workshop “Should Antitrust Assess Buyer Market Power Differently Than Seller Market Power?”, available at: https://www.justice.gov/archives/atr/should-antitrust-assess-buyer-market-power-differently-seller-market-power#N4
[6] One example may be seen in the dissenting statements of FTC Commissioners Joshua Phillips and Christine Wilson in Lifespan Corporation and Care New England Health System (FTC File No. 2110031, Feb. 17, 2022): “Including the additional count would also add complexity to the litigation and demand further resources to try the case, without changing the relief the Commission will obtain from a successful challenge to the current product market case or improving the Commission’s odds of success.” Available at: https://www.ftc.gov/system/files/ftc_gov/pdf/2110031wilsonphillipslifespancnestatement.pdf
[7] The FTC initially proposed to include additional reporting requirements with respect to labor for filing parties, but not with respect to other purchases such as raw materials or components. The labor requirements were not included in the final Rulemaking.
[8] E.g., Competitive Impact Statement, at 6, U.S. v. George’s Foods, LLC, No. 5:11-cv-00043 (W.D. Va. June 23, 2011) (“The Complaint alleges that the reduction in the number of processors resulting from the Transaction would likely have the effect of enhancing George’s incentive and ability to force growers to accept lower prices and less favorable contractual terms for grower services; in short, the Transaction would lead George’s to exercise monopsony power.”), available at: https://www.justice.gov/atr/case-document/file/497376/dl.
[9] The Bureau also found that the purchasers were differentiated by grain elevator capabilities and associated processing facilities (e.g., canola crushing) and by geographic draw areas (100 km for elevators and 200-300 km for crushers). Canadian Competition Bureau, “Proposed Acquisition by Bunge Limited of Viterra Limited”, Section 9 (Apr, 22, 2024), pp.34-46, available at: https://competition-bureau. canada.ca/en/how-we-foster-competition/education-and-outreach/report-minister-transport-and-parties-transaction-pursuant-subsectio n-5322-canada-transportation-act
[10] U.S. v. Bertelsmann SE & Co. KGaA, 646 F.Supp.3d 1 (D.D.C. 2022).
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