On December 18, 2023, the Federal Trade Commission (FTC) and Department of Justice, Antitrust Division (DOJ) (together, Agencies) released updated Merger Guidelines (Guidelines). The Guidelines amend, replace and consolidate the 2010 Horizontal Merger Guidelines and the 2020 Vertical Merger Guidelines. The Guidelines are not legally binding but provide some predictability to the antitrust bar and merging parties when evaluating the antitrust risk of proposed transactions.
The Agencies previewed draft Guidelines on July 19, 2023. The Guidelines have since been updated after a two-month period in which the Agencies received more than 30,000 comments to incorporate recent case law (after facing criticism that the draft Guidelines ignored decades of recent precedent), provide more clarity, and remove some of the structural presumptions advanced in the earlier draft. The Guidelines reflect and are consistent with positions the Agencies have been taking in recent years.
The final Guidelines, which reflect softened language on some topics, retain their emphasis on transactions that tend to create a monopoly, focus on mergers that may limit rivals’ access to inputs or lead to sharing of competitively sensitive information, advance new theories of harm relating to competition in labor markets, codify aggressive new thresholds for what transactions the Agencies view as presumptively illegal and formalize a new focus on cross-market effects and serial acquisitions.
- Emphasis on the "Tend to Create a Monopoly" prong of Clayton Act Section 7: The new Guidelines reflect a renewed emphasis on the second part of Section 7 of the Clayton Act which prohibits mergers and acquisitions which effect would be to substantially to lessen competition or tend to create a monopoly. For example, the Guidelines suggest that the Agencies will focus on transactions in "highly concentrated markets," in markets in which a deal party has a "dominant position" or during a "trend towards concentration."
- Vertical impact: The new Guidelines combine two prior draft Guidelines, focusing on mergers that limit access to products or services used by rivals to compete. The Guidelines also focus on mergers that limit rivals’ access to competitively sensitive information or deter rivals from entering a market.
- Labor market considerations: The new Guidelines describe how the Agencies analyze proposed transactions for reductions in labor market competition to determine whether the post-transaction firm would be able to decrease wages or degrade employee benefits and working conditions.
- Updated structural presumptions: The Guidelines advance enhanced presumptions that proposed transactions would harm competition. The 2010 Horizontal Merger Guidelines set out a presumption that mergers in “Highly Concentrated Markets” would increase market power, but the updated Guidelines indicate that the Agencies may presume illegality at lower concentration thresholds. Under the new Guidelines, the Agencies will treat any acquisition that results in a firm with greater than 30 percent market share and a moderate increase in market concentration as presumptively illegal. The Agencies also identify a stronger presumption of harm from concentration in industries experiencing a “trend toward concentration.”
While the July 19, 2023 draft Guidelines stated that the Agencies would apply similar presumptions in assessing whether a firm is in a “dominant position” and whether a vertical merger creates a market structure likely to foreclose competition, the revised Guidelines lack structural rules on how to identify either.
- New emphasis on cross-market effects: The new Guidelines warn against mergers that would allow a firm that is “dominant” in one market to extend its position in a “related market,” even if the monopolist does not have market power in that market. Likewise, the Guidelines warn against using control over one product market to obtain monopoly power in another, including by denying rivals access to critical inputs.
- Increased scrutiny of serial acquisitions: The new Guidelines describe how the Agencies may review a series of acquisitions by one acquiring firm. In those cases, the Agencies will consider the cumulative effect of those acquisitions instead of only analyzing each acquisition individually. The Agencies will also examine the acquiring firm’s strategic approach to determine the firm’s incentives.
The Agencies past merger guidelines are frequently cited by courts in Section 7 cases—the Agencies are likely to cite these guidelines in challenges in the coming year in the hope that courts adopt their tighter thresholds as law.
