On July 18, 2023, the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) released draft updates to their merger guidelines that reflect considerable shifts in how the DOJ and FTC review horizontal and vertical mergers. Although Attorney General Merrick B. Garland heralded the updated merger guidelines as “respond[ing] to modern market realities,” they are also in line with shifting enforcement priorities at the DOJ and FTC under President Biden.
The merger guidelines outline the framework the agencies apply when evaluating the competitive impact of mergers and acquisitions. Although not legally binding, these guidelines are a critical component in the merger enforcement process. Antitrust practitioners refer to them when advising clients, and courts regularly cite them in their opinions of merger enforcement cases. First released in 1968, the horizontal merger guidelines were last revised in 2010. The vertical merger guidelines were last revised in 2020 and rescinded by both agencies in 2021 without any replacement guidelines in place. The draft guidelines cover both horizontal and vertical mergers.
What Do the Draft Guidelines Include?
The agencies set forth 13 points or “guidelines” that will be used in determining whether they consider a transaction potentially anticompetitive. The first eight guidelines outline ways by which a transaction may lessen competition; for example, if the transaction significantly increases concentration in a market that is already highly concentrated. The next four clarify how the agencies will approach certain types of transactions or issues in a transaction. The final guideline is a catchall clarifying that the first 12 guidelines do not lay out every way in which a transaction may substantially lessen competition.
The draft guidelines reflect antitrust enforcement priorities identified by the Biden administration, including:
- More aggressive review and challenges to vertical mergers.
- Examination of the impact of transactions on workers in mergers involving parties that compete for employees.
- A greater focus on transactions that are part of a series of acquisitions or that involve minority interest acquisitions.
- Increased emphasis on determining whether a transaction might allow the merged firm to extend a dominant position (defined as one firm having at least 30% market share) in one market to a new market.
In addition, the new guidelines lower the threshold above which a post-merger market will be considered highly concentrated and the threshold at which an increase of concentration resulting from a transaction will be considered anticompetitive. In addition, the new guidelines assert that any transaction involving a so-called dominant firm will be examined to determine whether the merger will “entrench” that dominant position.
As these guidelines reflect, the agencies will continue to critically assess transactions involving technology companies and private equity firms, consistent with recent enforcement actions and public statements about enforcement in these sectors. Finally, the draft guidelines confirm that the agencies will evaluate the impact of a transaction on areas beyond price, including workforce and innovation.
What Comes Next for the Draft Guidelines?
A 60-day public comment period will run through Sept. 18, 2023. The agencies then will consider and evaluate the comments and make any revisions to the draft before finalizing the guidelines. There is no specific timeline for the revision process and the expectation is that it may take several months.