How Concentrated Is This Market?
Antitrust lawyers, regulators and merger analysts all ask one question first: how concentrated is this market? The answer is the Herfindahl-Hirschman Index (HHI) — the sum of every firm’s squared market share, the single number behind DOJ merger guidelines.
This free calculator takes each firm’s market share, computes the HHI instantly, places it in the unconcentrated / moderately / highly concentrated bands (2023 Merger Guidelines), and — if you enter pre- and post-merger shares — quantifies the merger’s HHI impact. No signup, everything runs in your browser.
Herfindahl-Hirschman Index · market concentration
Enter at least 2 firms with shares above zero (total should be near 100%).
| Firm | Share | s² contribution |
|---|
Thresholds per the DOJ & FTC 2023 Horizontal Merger Guidelines: below 1,000 unconcentrated; 1,000–1,800 moderately concentrated; above 1,800 highly concentrated. Educational estimates only — not legal advice.
How to Use This Calculator
- Enter each firm’s market share as a percentage (e.g. 30 for 30%). Shares should cover the whole market — they’ll normally total 100%.
- Click Calculate HHI — the index, the concentration band and the squared-share breakdown appear instantly.
- For merger analysis, enter the combined firm’s post-merger share (or the two merging firms’ shares) to see the ΔHHI.
- Read the verdict: the band plus the ΔHHI tells you whether regulators would likely scrutinize the deal.
- Use decimals for fractional shares (e.g. 12.5) — the calculator handles them.
The Formula
ΔHHI (merger) = HHIpost − HHIpre (combining firms A and B: Δ ≈ 2 × sA × sB)
Worked example: four firms with shares 40, 30, 20 and 10. HHI = 1600 + 900 + 400 + 100 = 3,000 — highly concentrated. If the 30 and 20 firms merge: new shares 50, 40, 10 → HHI = 2500 + 1600 + 100 = 4,200 (ΔHHI = 1,200).
DOJ Concentration Bands (2023 Merger Guidelines)
| HHI | Band | What it signals |
|---|---|---|
| Below 1,000 | Unconcentrated | Mergers rarely raise concerns |
| 1,000–1,800 | Moderately concentrated | Mergers get a closer look, especially when the increase is large |
| Above 1,800 | Highly concentrated | A merger raising HHI by more than 100 points is presumed to substantially lessen competition |
A note on the guidelines
The 2023 Merger Guidelines tightened the bands considerably versus the 2010 guidelines this index used for a decade. The highly concentrated threshold dropped from 2,500 to 1,800, the moderate band now starts at 1,000 instead of 1,500, and an increase of just over 100 points in a highly concentrated market now triggers a presumption against the merger. Deals that would have passed under the old bands can draw a challenge today — this calculator uses the current 2023 bands throughout.
The Numbers-Equivalent: HHI in Plain English
A useful translation of any HHI is its numbers-equivalent: N = 10,000 ÷ HHI — the number of equal-sized firms that would produce the same index. The worked example above (HHI 3,000) behaves like a market of about 3.3 equal firms; an HHI of 2,500 equals 4 equal firms; a monopoly (10,000) equals exactly 1. When an HHI feels abstract, this conversion makes the concentration tangible.
Regulators also look beyond the index itself. Under the 2023 guidelines, a merger in a highly concentrated market (HHI above 1,800) that raises the HHI by more than 100 points — and gives the combined firm more than 30% of the market — is presumed to substantially lessen competition unless the merging parties can rebut it.
Frequently Asked Questions
What is a good HHI score?
“Good” depends on your seat. For competition, lower is better: below 1,000 is unconcentrated (competitive), 1,000–1,800 moderately concentrated, above 1,800 highly concentrated. A monopoly scores 10,000.
Why are market shares squared?
Squaring gives dominant firms disproportionate weight — a 40% firm contributes 1,600 points while ten 4% firms contribute 160 combined. That’s the point: concentration is about dominance, not headcount.
What changed in the 2023 merger guidelines?
The DOJ and FTC lowered the thresholds: markets above 1,800 are now “highly concentrated” (previously 2,500), and smaller HHI increases draw scrutiny. The bands used here reflect the current guidelines.
Do shares have to total 100%?
Ideally yes — HHI assumes the shares describe the whole relevant market. If yours total 95%, the missing 5% (however fragmented) can only add a little, so the result is a slight underestimate.
What is ΔHHI and why does it matter?
The change in HHI caused by a merger: HHI after minus HHI before. Regulators use it as the primary screen — under the 2023 guidelines, in a highly concentrated market (HHI above 1,800) an increase of more than 100 points is presumed to substantially lessen competition.
Can HHI be used outside antitrust?
Yes — portfolio managers use it to measure diversification, economists to study industry structure, and procurement teams to assess supplier-risk concentration.
What is the numbers-equivalent of an HHI score?
N = 10,000 ÷ HHI — the number of equal-sized firms that would yield the same index. An HHI of 2,000 equals 5 equal firms; an HHI of 5,000 equals 2. It is a quick way to make a concentration score intuitive.
Final Thoughts
HHI compresses an entire market structure into one number — and that number decides whether a merger sails through or faces a second request. Compute it before you sign the LOI.
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