United States: Revised merger guidelines under consideration and public comments sought
On January 18, 2022, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) announcement a joint public inquiry seeking input on ways to “modernize” federal merger guidelines and “strengthen merger enforcement.” The press release asks public comments on a range of topics and highlights the common agency view that many industries in the economy are becoming more concentrated and “less competitive”.
In their statements, DOJ Assistant Attorneys General (AAG) for the Antitrust Division, Jonathan Canterand Chairman of the FTC, Lina M. Khanannounced its intention to “revise” the 2010 Horizontal Merger Guidelines and conduct a comprehensive review of the 2020 Vertical Merger Guidelines.1 Stressing the need for public participation and engagement, they hope to finalize the review by the end of this year.
- Key Takeaways: Comments from FTC Chairman Khan
- Key Takeaways: DOJ AAG Kanter Comments
- Request for public contribution
- Next steps
Following July 9, 2021 Biden Executive Orderwhich aims to promote strong antitrust enforcement priorities in key marketsthe FTC and the DOJ published a Joint Statement stating that they would review existing merger guidelines to determine if they are “too permissive”. The FTC has also implemented several measures, including regulatory changes and broad clearances, to spur greater enforcement against “unlawful mergers.” In announcing these changes, the FTC cited the “increase in merger filings” and the need to ensure that merger reviews are more “comprehensive and analytically rigorous,” which we have already discussed. here.
The FTC also voted to withdraw the vertical merger guidelines in September 2021. Although the DOJ has not yet withdrawn these guidelines, DOJ AAG Jonathan Kanter Noted in his statement on January 18, 2022accompanying the FTC announcement regarding the joint review of the merger guidelines, “the alleged divergence between the DOJ and the FTC has been overemphasized” and noted that the DOJ “shares the substantive concerns of the FTC regarding the vertical merger guidelines “.
Khan chair raised three “critical” questions to be resolved:
- Do the current guidelines adequately take into account the range of business strategies and incentives that drive mergers and acquisitions, such as “moat building or data aggregation strategies by digital platforms, or games deployment by private equity firms”?
- Do the guidelines adequately assess how mergers affect labor markets and workers, including consideration of factors other than wages, salaries and financial compensation or assuming that layoffs might be considered as recognizable “efficiencies”?
- Are the guidelines “unduly limited” on the types of evidence considered, and should agencies distinguish between the types of evidence that may be considered based on industry or for assessing effects? priceless”?
AAG Kanter also described several “areas of interest”, offering the following observations and questions to consider:
- If the current approach focuses on mergers that “significantly lessen competition” at the expense of analyzing mergers that may “tend to create a monopoly”.
- Whether the current approach of dividing effects into ‘vertical’ and ‘horizontal’ categories is appropriate or whether a more ‘multi-dimensional’ approach should be considered to take into account ‘market realities’, as ‘often transactions do not ‘fit perfectly’ horizontally and vertically. categories.
- Yes, the existing guidelines “exaggerate the potential efficiencies of vertical mergers and fail to identify important relevant theories of harm.”
- Whether ‘market realities’ should do more to guide the analysis given that ‘the static formalism of market definition may not always be the most reliable tool’.
- Whether there are other tools that one could rely on instead of market definition, such as head-to-head competition and other indices of market power, to analyze mergers.
- If agencies need to “take a closer look at competition within or for a market,” given that “stacks or clusters of component products and services often come together to drive digital supply chains and physical”.
President Khan and AAG Kanter encouraged comments and specifically requested comments on the following areas of inquiry:
- Should merger thresholds be changed to improve enforcement, and could certain measures or qualitative factors trigger presumptions of competitive harm, and what evidence should be used to verify the accuracy of these presumptions?
- What are reliable measures to account for non-price competition, and when might direct evidence of a transaction’s likely competitive effects eliminate the need for a separate market definition analysis?
- What changes to the guidelines are needed to account for the potential future importance of nascent competitors
- How can the guidelines better address the issue of buyer power, and what amendments are appropriate to take into account the impact of mergers on labor markets?
Notably, in a subsequent address on January 24, 2022, to the Antitrust Section of the New York State Bar Association, AAG Kanter announced that the DOJ would turn to pursuing injunctions as a presumptive remedy for anti-competitive transactions, instead of negotiated consent decrees. Kanter also noted his skepticism of partial surrenders in merger settlements and said that going forward, the agency will pursue structural solutions rather than behavioral solutions in conduct cases where possible.
We will continue to monitor relevant statements, actions and initiatives and provide relevant updates.
In the meantime, we are available to answer any specific questions you have about how these developments may affect your business and your M&A strategy.
1 While the FTC repealed the 2020 vertical merger guidelines, the DOJ has yet to follow suit.