U.S. Antitrust Agencies Announce Review of Merger Analysis Framework
U.S. Antitrust Agencies Announce Review of Merger Analysis Framework
On January 18, 2022, the U.S. Federal Trade Commission (“FTC”) and the Department of Justice Antitrust Division (“DOJ”) held a joint press conference to announce the launch of a broad‑ranging public inquiry aimed at revisiting and likely revising the Merger Guidelines (“Guidelines”), which outline the agencies’ framework for analyzing mergers and acquisitions. The agencies have issued a detailed request for public input on nearly every aspect of their analysis, with a particular focus on examining how the Guidelines should account for labor markets, acquisitions of nascent or potential competitors, and digital markets. Agency leadership reiterated a desire for more aggressive antitrust enforcement and expressed concern that the current Guidelines fail to adequately consider modern market realities, hampering their ability to detect and prevent anticompetitive transactions. The announcement reflects many of the issues raised and being debated in connection with President Biden’s Executive Order on Competition, the wider discussion about the need for antitrust reform, and parallel legislative efforts on Capitol Hill. The agencies’ announcement and request for input signal that a significant departure from the standards governing merger review may be on the horizon.
The Guidelines outline the analytical framework and enforcement policies of the DOJ and FTC when investigating mergers and acquisitions under federal antitrust laws. They are intended to reflect the agencies’ views and practices as to the key elements of merger review, including types of competitive harm and evidence thereof, how to define markets, how to assess market concentration, the significance of market entry, buyer power, and efficiencies, and how to evaluate acquisitions of distressed firms or assets.
The current Horizontal Merger Guidelines were issued by the FTC and DOJ in 2010 under the Obama Administration, replacing the 1992 guidelines (as partially revised in 1997) after public comment, and have remained in place since. The 2010 iteration expanded on prior versions, placing greater emphasis on existing agency practice at the time, and reflecting a wider variety of factors and sources of evidence being considered when evaluating a transaction’s potential impact on competition.
The Vertical Guidelines are more recent and controversial. They were jointly issued by the DOJ and FTC in 2020, but in 2021, under FTC Chair Lina Khan’s leadership, the FTC withdrew from them. Nevertheless, the Vertical Merger Guidelines provide a comprehensive description of the agencies’ enforcement toolkit in evaluating vertical mergers between firms at different levels of the distribution chain.
The FTC and DOJ issued nearly 10 pages of questions seeking input from the public, including “market participants, government entities, economists, attorneys, academics, unions, workers, farmers, ranchers, businesses, franchisees, and consumers.” The questions cover a broad range of topics, including (1) the fundamental legal standards governing review; (2) the traditional distinction between horizontal and vertical mergers; (3) types and sources of evidence of competitive harm; (4) the significance of judicial precedent; (5) the value of structural (e.g., market share-based) presumptions; (6) the utility of market definition in analyzing mergers; (7) treatment of efficiencies; (8) evaluating impact on potential and nascent competition; (9) analysis of monopsony power, including in labor markets; and (10) unique characteristics of digital markets, including non-price effects.
The agencies touched on a number of topics in their joint press conference. FTC Chair Khan noted her particular interest in understanding whether the current Guidelines adequately consider “the range of business strategies and incentives that might drive acquisitions, be it moat-building or data-aggregation strategies by digital platforms, or roll-up plays by private equity firms”, potential harms to labor markets, and direct evidence of market power, especially non-price effects. Chair Khan referred repeatedly to the FTC’s growing scrutiny of transactions involving technology companies, digital markets, and private equity firms.
DOJ Assistant Attorney General Jonathan Kanter’s remarks focused on topics such as whether the Guidelines adequately address transactions involving already dominant firms, whether they should continue to strictly bifurcate horizontal and vertical merger analyses where transactions may resist neat classifications, and the need to consider direct evidence of potential anticompetitive effects instead of “the static formalism of market definition.”
FTC Commissioners Noah Phillips and Christine Wilson issued a statement welcoming the agencies’ request for information, while encouraging the public to consider “assumptions that appear to underlie particular questions,” including the assumption—contrary to traditional antitrust analysis—that harm to rivals (as distinguished from harm to competition, generally) is an antitrust problem, and the suggestion “that the agencies should discount or ignore efficiencies when analyzing mergers.” Their statement expresses some skepticism that new guidelines will adequately consider legal precedent and asks the agencies to “proceed with care and caution.”
The agencies will be accepting public comments in response to their request for 60 days, or no later than Monday, March 21, 2022. The agencies have expressed an intent to incorporate public views and evidence into the revised guidelines as appropriate and will publish the proposed guidelines for further public comment.
The agencies’ joint press conference and request for information is the latest indication that significant changes to U.S. antitrust enforcement in the M&A context are underway. The request provides perhaps the clearest indication yet of where revisions to the existing Guidelines might focus, including on structural presumptions, the role of market definition, tools to evaluate deals in digital markets, and the impact of transactions on labor. The request also provides an important opportunity for market participants and other stakeholders to contribute commentary, insight, and advocacy to inform and potentially influence the process.
 Exec. Order No. 14,036, 86 Fed. Reg. 36987 (Jul. 17, 2021), available at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/.
 See Fed. Trade Comm’n, “Federal Trade Commission Withdraws Vertical Merger Guidelines and Commentary” (Sept. 15, 2021), available at https://www.ftc.gov/news-events/press-releases/2021/09/federal-trade-commission-withdraws-vertical-merger-guidelines.
 See Fed. Trade Comm’n, “Federal Trade Commission and Justice Department Seek to Strengthen Enforcement Against Illegal Mergers” (Jan. 18, 2023), available at https://www.ftc.gov/news-events/press-releases/2022/01/ftc-and-justice-department-seek-to-strengthen-enforcement-against-illegal-mergers.
 See Fed. Trade Comm’n, “Statement of Chair Lina M. Khan Regarding the Request for Information on Merger Enforcement” (Jan. 18, 2022), available at https://www.ftc.gov/public-statements/2022/01/statement-chair-lina-m-khan-regarding-request-information-merger.
 See U.S. Dep’t of Just., “Assistant Attorney General Jonathan Kanter Delivers Remarks on Modernizing Merger Guidelines” (Jan. 18, 2022), available at https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-delivers-remarks-modernizing-merger-guidelines.
 See Fed. Trade Comm’n, “Statement of Commissioners Noah Joshua Phillips and Christine S. Wilson Regarding the Request for Information on Merger Enforcement” (Jan. 18, 2022), available at https://www.ftc.gov/public-statements/2022/01/statement-commissioners-phillips-wilson-request-for-information-merger-enforcement.