Justice Department and Federal Trade Commission Release Proposed Update to Antitrust Guidelines for Mergers and Acquisitions
Today, the Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission (FTC) issued new proposed guidelines detailing factors the agencies intend to consider in examining, investigating, and challenging mergers and other acquisitions under the federal antitrust laws. The agencies have issued, withdrawn, and/or revised these “merger guidelines” a number of times over the past five decades. While they are not binding legal authority, these guidelines provide some degree of transparency about whether certain transactions will face antitrust opposition from the agencies. The guidelines have also been used by parties in arguments in court and administrative proceedings and even cited by Courts as persuasive authority, even though the legality of proposed mergers and acquisitions is ultimately determined under long-established antitrust statutes and judicial precedent.
The agencies have proposed the following 13 guidelines:
- Mergers should not significantly increase concentration in highly concentrated markets.
- Mergers should not eliminate substantial competition between firms.
- Mergers should not increase the risk of coordination.
- Mergers should not eliminate a potential entrant in a concentrated market.
- Mergers should not substantially lessen competition by creating a firm that controls products or services that its rivals may use to compete.
- Vertical mergers should not create market structures that foreclose competition.
- Mergers should not entrench or extend a dominant position.
- Mergers should not further a trend toward concentration.
- When a merger is part of a series of multiple acquisitions, the agencies may examine the whole series.
- When a merger involves a multi-sided platform, the agencies examine competition between platforms, on a platform, or to displace a platform.
- When a merger involves competing buyers, the agencies examine whether it may substantially lessen competition for workers or other sellers.
- When an acquisition involves partial ownership or minority interests, the agencies examine its impact on competition.
- Mergers should not otherwise substantially lessen competition or tend to create a monopoly.
The proposed guidelines include a number of new factors that the agencies might consider, many reflecting previously stated priorities of the Biden Administration, including the treatment deals that involve technology platforms, private equity “rollups” of a series of small competing firms, and the impact of deals on competition for labor (i.e., whether the merging parties will be able to yield more power as purchasers of labor and potentially lower worker compensation).
These proposed guidelines also reflect the Biden Administration’s aggressive approach to antitrust enforcement. The proposed guidelines state that many combinations of competitors (known as horizontal mergers) resulting in market shares of 30% or more may be considered presumptively illegal. This is a significant lowering of the market concentration bar. The proposed guidelines also deem firms with a 30% market share to be presumptively dominant, and closely scrutinize whether any proposed acquisition will entrench that position through, for example, raising entry barriers, making it more difficult for customers to switch suppliers, or eliminating a nascent competitive threat.
The proposed guidelines also address “vertical” mergers (combinations involving buyers and sellers), examining whether a transaction will result in a company acquiring and potentially withholding from its rivals product or service lines that are critical to rivals’ ability to compete. The FTC very recently invoked this analytical framework in its unsuccessful attempt to block Microsoft’s vertical acquisition of Activision Blizzard (a popular video game vendor).
The public will have a 60-day period to submit comments to the agencies, after which the agencies may make further revisions, withdraw the proposed rule or request additional comments.
For more information on these proposed guidelines or other antitrust issues, please contact Howard Iwrey (248-203-0526, firstname.lastname@example.org), Cody Rockey (734-214-7655, email@example.com), or your Dykema relationship attorney.