The Federal Trade Commission (FTC) and the Department of Justice Antitrust Division have announced the release of new, highly anticipated guidelines on the enforcement of merger law. These guidelines, currently in draft form, demonstrate the agencies’ commitment to adapting to the digital age and evolving market conditions. They apply to both vertical and horizontal mergers. This development comes two years after the FTC withdrew the previous version of the vertical merger guidelines, citing deficiencies.
To provide context, a vertical merger involves two businesses operating in different parts of the supply chain within an industry, as defined by the FTC. On the other hand, horizontal mergers occur between companies that compete directly or operate in similar markets.
An example of a vertical merger is Microsoft’s proposed $68.7 billion acquisition of Activision Blizzard. Microsoft, known for its Xbox consoles and streaming services, distributes games, while Activision creates them. The FTC questioned the deal on anticompetitive grounds, but the court denied the regulator’s request to halt it.
Under the leadership of Chair Lina Khan, the FTC has taken a more aggressive stance in restricting the expansion of Big Tech companies. Similarly, the DOJ Antitrust Division, headed by Assistant Attorney General Jonathan Kanter, has intensified its efforts. Both agencies emphasize the need to update enforcement strategies to align with the modernized economy, even if it leads to more contested cases.
The newly introduced guidelines outline 13 key factors for evaluating the potential blocking of mergers. These factors cover various aspects, such as market concentration, competition elimination, coordination risks, impact on potential entrants, control over competitive products/services, market structure implications, entrenchment of dominant positions, concentration trends, and more.
It is worth noting that the previous 2020 guidelines did not explicitly address the impact of mergers on competition for workers. The revised guidelines now explicitly tackle this issue and also consider challenges related to multi-sided platforms like Amazon that cater to both consumers and businesses.
The agencies may expand the scope of deals they review by examining a series of transactions rather than focusing solely on individual mergers. The FTC has already taken steps toward this approach, filing a lawsuit against Facebook parent company Meta in 2020 for multiple acquisitions aimed at maintaining alleged monopoly power.
During a briefing, a senior FTC official stated that the guidelines aim to provide the desired clarity to judges who often encounter infrequent antitrust cases, addressing a request frequently made in the past.
The FTC announced in 2021 that it would collaborate with the DOJ to develop new guidelines after withdrawing the previous version. The then-Democratic majority criticized the 2020 guidelines, arguing that they embraced a flawed economic theory regarding the purported pro-competitive benefits of mergers without any legal or market support.
Since the withdrawal of the previous guidelines, agency staff members have faced numerous inquiries about the availability of an updated set of rules. The FTC official and a senior DOJ official stated that the new guidelines reflect their modernized approach to enforcing merger law while emphasizing that the law itself has not undergone any changes. They reviewed over 5,000 comments received during the project’s development.
The public has until September 18 to submit comments on the draft guidelines. The agencies will review these comments and consider revisions before finalizing the publication. The longevity of the new guidelines may depend on political dynamics following the presidential election in 2024. It is noteworthy that the FTC voted to withdraw the previous guidelines just over a year after their release.
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WATCH: FTC court ruling shows the challenges in contesting vertical deals.
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