FTC and DOJ Seek Comment on Updated Merger Guidelines

What Happened: The Federal Trade Commission (FTC) and Department of Justice (DOJ) (the “Agencies”) released a draft update of the Merger Guidelines (“Draft Guidelines”) for public comment on July 19, 2023. The Draft Guidelines explain how the Agencies identify potentially illegal mergers and would replace the Horizontal Merger Guidelines issued in 2010, and the Vertical Merger Guidelines issued in 2020. The Draft Guidelines reflect recent changes to the enforcement priorities of the Agencies, as new leadership has focused on issues like vertical and portfolio effects, serial acquisitions and effects in labor markets.

The Full Story: The Draft Guidelines introduce a new format by providing a list of thirteen principles that the Agencies use when “applying the guidelines” to determine whether a merger is unlawfully anticompetitive under the antitrust laws. This replaces the stepwise economic-analytical approach contained in prior versions. While many of the principles are familiar, some extend the Merger Guidelines in new directions. For example, the new guidance introduces an “entrenchment doctrine” that would scrutinize mergers that risk extending a “dominant” position, including into other markets. The Draft Guidelines also target “serial acquisitions,” announcing that the Agencies will consider the cumulative effect of the pattern or strategy, or as an industry trend. This focus on serial acquisitions appears to be aimed at PE firms that engage in “roll-up” acquisitions. A firm that engages in multiple small acquisitions may violate Section 7 of the Clayton Act, even if no single acquisition on its own was a Section 7 violation. The Draft Guidelines specifically call out “multi-sided platforms” for additional consideration because of their distinctive characteristics and effect on multiple markets. And effects on labor markets are singled out as one of the ways a merger may lessen competition among buyers, which has been a priority for the Agencies as exhibited by DOJ’s criminal prosecutions of no-poach agreements and the FTC’s proposed rulemaking on non-compete agreements.

The Draft Guidelines also describe the frameworks and tools that may be used when analyzing a merger with respect to each guideline. Most significantly, the new guidance substantially lowers the market share threshold at which a merger is presumed to be anticompetitive. Any merger resulting in a firm with more than 30% market share would be a presumptive violation of Section 7. As mentioned above, “dominant” firms with market shares exceeding 30% would be subjected to heightened scrutiny for any proposed merger. The Draft Guidelines would also presume a violation in the case of a merger that restructures a vertical supply or distribution chain such that a firm gains control of 50% of the market for any input used by a competitor, with shares below that level evaluated for whether the acquisition “deprives rivals of a fair opportunity to compete.”

Why It Matters: The Guidelines institutionalize new principles that have been emphasized by the Agencies in their recent merger enforcement efforts, which serves the goal of enhancing transparency and promoting awareness of how the Agencies carry out antitrust enforcement with respect to mergers and acquisitions. However, the changes reflected in this draft are far more pronounced in contrast to the gradual evolution the guidelines have undergone since they were first published in 1968. In the past, the Merger Guidelines have been a trusted resource for—and persuasive to— the courts to provide a framework for considering merger challenges. While the Agencies have made a clear attempt to maintain that perception, including by incorporating case citations for the first time so that the Draft Guidelines are “rooted in the law,” it remains unknown whether they will be as widely influential and respected as prior versions. Notably, the Draft Guidelines cite to several cases from the 1960’s and 1970’s including Brown Shoe Co., Inc. v. United States, 370 U.S. 294 (1962) and United States v. Philadelphia Nat'l Bank, 374 U.S. 321 (1963). There are just a handful of case citations that post-date the 2010 version of the Merger Guidelines. The Draft Guidelines are subject to a 60-day public comment period, closing on September 18, 2023, with a final version expected to be published several months later.