Following guidance from the White House to the Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ) to modernize their merger guidelines, the FTC and DOJ announced on January 18, 2022 that they welcome public comments on revisions to the 2010 Horizontal Merger Guidelines and the 2020 Vertical Merger Guidelines. The agencies will accept comments until March 21, 2022.
For companies and trade associations interested in the future of merger enforcement, the request for comment on the future direction of the Merger Guidelines is a rare and consequential opportunity, as the DOJ and FTC take industry input seriously when considering changes. Commenters will have multiple opportunities to influence the direction of the merger guidelines, as initial comments will be followed by a draft of updated Guidelines published for commentary.
Background on Merger Guideline Modernization
In July 2021, President Biden issued an Executive Order on competition, directing the Attorney General and FTC Chair to review and consider revising both the Horizontal and Vertical Merger Guidelines. DOJ and FTC contemporaneously issued a joint statement that they would take a “hard look” at both sets of merger guidelines.
The Merger Guidelines have been revised multiple times since their introduction in 1968. During the prior review of the 1997 Merger Guidelines that led to the publication of the current 2010 Horizontal Merger Guidelines, the DOJ and FTC jointly engaged in a Horizontal Merger Guideline Review Project that included a request for public comments and five joint public workshops. The guideline revision process has historically taken about a year.
The Vertical Merger Guidelines were issued in 2020 and replaced outdated guidance from the 1980s. In September 2021, the FTC voted to withdraw the 2020 Vertical Merger Guidelines. At the time, the Acting Assistant Attorney General of the DOJ Antitrust Division issued a statement that the DOJ was not withdrawing its reliance on the Guidelines, but would continue to work with the FTC on how they could be improved. Since then, Assistant Attorney General (AAG) for Antitrust Jonathan Kanter has criticized the Vertical Guidelines for overstating potential efficiencies and failing to identify relevant theories of harm.
On January 18, 2022, the DOJ and FTC announced a joint inquiry to update the merger guidelines once again. This time, the antitrust agencies’ goal is to the strengthen enforcement “against illegal mergers,” implying that “illegal, anticompetitive deals” have left many industries “more concentrated and less competitive.”
According to FTC Chair Lina Khan, the agencies’ effort to modernize the merger guidelines is needed now because global deal-making in 2021 was at a record high of $5.8 trillion and merger filings under the Hart-Scott-Rodino Act doubled. Both Chair Khan and AAG Kanter echoed remarks by Attorney General Merrick Garland that there has been a lack of competition in too many concentrated industries, with AAG Kanter noting that merger enforcement can help “prevent this problem from getting worse.”
Request for Public Input and Areas for Comment
Chair Khan has noted that commentary from a broad range of market participants will be critical to the agencies’ efforts to review the existing guidelines and consider potential updates and revisions. She specifically encouraged input from market participants outside of the antitrust community, including entrepreneurs, start-ups, investors, independent businesses, farmers, workers, and consumers. Likewise, AAG Kanter expressed that the agencies seek “to learn from market participants what is working and what is not” and that the “views of consumers, workers, innovators, and others on the ground feeling the harms of market concentration present an incredibly valuable perspective for our efforts.”
The agencies’ joint request for information (RFI) on merger enforcement seeks comment on how advances in firm and market behavior in the modern economy should inform a newly revised set of guidelines. The agencies also seek public opinion on areas the current merger guidelines “underemphasize or neglect, such as labor market effects and non-price elements of competition like innovation, quality, potential competition and ‘any trend toward concentration.’”
The RFI enumerates 165 specific questions grouped into fifteen areas of inquiry that will inform the agencies’ guidelines review. Those fifteen areas are: (1) Purpose, Harms and Scope; (2) Types and Sources of Evidence; (3) Coordinated Effects; (4) Unilateral Effects; (5) Presumptions; (6) Market Definition; (7) Potential and Nascent Competition; (8) Remedies; (9) Monopsony Power and Labor Markets; (10) Innovation and Intellectual Property; (11) Digital Markets; (12) Special Characteristics Markets; (13) Barriers to Firm Entry and Growth; (14) Efficiencies; and (15) Failing and Flailing Firms.
In her comments, Chair Khan highlighted questions about acquisition strategies by digital platforms and private equity firms, and whether harm to workers is adequately addressed by current guidelines.
The Importance of Commenting
For the first time in over a decade, the business community has an opportunity to be part of the public conversation regarding revised Horizontal Merger Guidelines. This opportunity is important because federal courts across the country have repeatedly relied on the Guidelines as persuasive and useful authority in analyzing merger challenges.
At a time when antitrust enforcers have advocated for more challenges to mergers, it is more important than ever for companies and market participants interested in mergers and acquisitions in the coming years to comment on how the merger guidelines should affect the future of antitrust policy. The Guidelines have never been binding on the analysis of a merger, but they influence how the courts treat mergers and, as a result, how the federal antitrust agencies assess the likelihood of success of contemplated merger challenges.
The antitrust laws are nuanced and complex, and their application to particular business situations is a fact-specific inquiry. Businesses concerned about how recent developments will impact their antitrust risks should consult with legal counsel.