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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
United States | Publication | januari 2020
On Friday, January 10, the Department of Justice's Antitrust Division (DOJ or Division), and the Federal Trade Commission (FTC) announced the release of the 2020 Draft Vertical Merger Guidelines (2020 Draft VMG) for a 30-day comment period, during which the DOJ and FTC will accept comments and suggestions to the draft. Once finalized, these guidelines will supersede the 1984 Non-Horizontal Merger Guidelines, which have not been updated since they were first introduced. As with any guidelines issued by the agencies, the finalized Vertical Merger Guidelines will be instructive for the agencies' review of vertical mergers, and will be persuasive but not binding on courts should a contested merger enter litigation.
As explained in the 2020 Draft VMG, vertical mergers combine firms or assets that operate at different stages of the same distribution chain. In describing a vertical relationship, the stage closer to final consumers is termed "downstream," and the stage farther from final consumers is termed "upstream." By contrast, horizontal mergers are transactions that take place between direct competitors.
The Draft 2020 VMG rely heavily on the legal and economic theories and analytical framework set forth in the 2010 Horizontal Merger Guidelines (2010 HMG), and which are explicitly intended to be read in conjunction with the 2010 HMG. The Draft 2020 VMG state that horizontal considerations such as the analytic framework for evaluating entry considerations, the treatment of the acquisition of a failing firm or its assets, and the acquisition of a partial ownership interest are relevant to the evaluation of the competitive effects of vertical mergers as well.
Addressing the issues specific to vertical transactions, the 2020 VMG include modern approaches such as identifying relevant markets and related products; identifying market participants, market shares, and market concentration; analyzing evidence of adverse competitive effects, unilateral effects and coordinated effects; and efficiencies.
Some of the highlights of the Draft 2020 VMG include:
Commissioner Christine Wilson's concurring statement regarding the Commission's decision to publish the draft guidelines specifically requested the public's feedback on specific topics raised in the 2020 Draft VMG, including:
While all the FTC commissioners agreed that the 1984 Non-Horizontal Merger Guidelines should be withdrawn, Commissioners Rebecca Slaughter and Rohit Chopra abstained from voting on whether to publish the 2020 Draft VMG. Commissioner Slaughter expressed concerns about the current proposed guidelines as creating too high of a standard of review for proposed transactions and not clarifying the various investigatory and enforcement powers the agencies have.4 Commissioner Chopra, in his separate statement, argued that the draft 2020 VMG do not take into account "modern threats to competition" or consider whether prior enforcement was effective.
Our antitrust group remains at the forefront of representing clients before the DOJ and FTC. We encourage you to contact us if you would like to discuss how the Draft 2020 VMG, if adopted, could impact your future strategic transactions and whether you should consider submitting comments to the FTC and DOJ. The public comment period ends on February 11, 2020.
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