DOJ and FTC Propose New Merger Guidelines to Expand Merger Challenges

Welcome to the latest episode of Womble Perspectives. Today, we're diving deep into a game-changing topic: the recently proposed merger guidelines jointly presented by the Department of Justice and the Federal Trade Commission. These guidelines, if approved, are set to shake up the way mergers are assessed and contested, marking a significant shift in the landscape.

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About the author:
Lee Van Voorhis (bio)

Transcript

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In today’s episode of Womble Perspectives, we're dissecting last month’s proposed merger guidelines jointly presented by the Department of Justice and the Federal Trade Commission. If adopted, these guidelines are set to redefine how mergers are evaluated and challenged.   

So, let's unpack the details and understand the potential implications.  

 On July nineteenth, The FTC and Antitrust Division of the DOJ proposed a new set of Horizontal Merger Guidelines intended to replace the current version adopted in two thousand ten. Should these guidelines be adopted, far more mergers would be challenged due to the fact that deals with much lower combined market shares could be challenged.   

 Let’s take a look at some of the radical proposals that would adjust the criteria by which mergers could be considered illegal.  

 For example, the guidelines suggest a merger could be considered illegal if it furthers a trend toward market concentration. Unfortunately, there’s no guidance as to what measures constitute a trend, leaving plenty of room for argument.   

Also, any firm holding a combined market share of only thirty percent would be presumed illegal if there is even a small change in market concentration. For example, a firm with a twenty nine percent market share acquiring a competitor with two percent market share would be presumed illegal. This would be a change on the Herfindahl Hirschman Index of more than one hundred points.  

The guidelines also suggest mergers that entrench or extend a dominant firm’s position would be considered illegal. Entrenchment could happen by, for example, increasing barriers to entry, increasing switching costs, or interfering with use of competitive alternatives. Likewise, extension of market power could happen by bundling, conditioning, or otherwise linking sales of two products. This would be considered illegal even if the conduct wouldn’t violate section two of the Sherman Act.  

A merger’s impact on labor could also make the transaction illegal. Historically, reducing the costs of labor have been viewed as potential efficiencies, since reducing costs should also reduce prices. The new Guidelines make explicit that this Administration wishes to stand that on its head.  

In addition, the guidelines suggest that a merger not otherwise illegal could be found so for being part of a series. Again, the Guidelines provide no reliable guidance on how to evaluate whether a particular merger is part of an offensive series. 

Finally, the guidelines offer a new section on platforms, which suggests that even effects on competition on a single platform may make a merger illegal.  

These are six of the most radical changes suggested in the thirteen proposed guidelines. Also notable is Guideline 13, used as catchall for “any other” merger that may substantially lessen competition. That may be the most obvious case of the proposed Guidelines failing to provide actual guidance to parties considering a transaction.   

As we close out the episode, it’s important to note that, for now, these are just proposed guidelines. They are sure to engender a host of public comments, and may be revised after consideration of those comments.  

More in depth analysis and updates on the status of the proposed guidelines will appear under the insights section of the Womble Bond Dickinson website. To see a full, written version of this rundown, follow the link in the show notes.  

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