In a joint announcement on July 19, the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) unveiled their draft Merger Guidelines, inviting public comments on the proposed guidelines for government review of mergers and acquisitions. The primary objective of these updated guidelines is to better reflect how the agencies assess a merger’s impact on competition in the modern economy and evaluate proposed mergers under federal antitrust laws.
Attorney General Merrick B. Garland emphasized the importance of preventing “unchecked consolidation,” as it poses a significant threat to the free and fair markets upon which the U.S. economy relies. The Attorney General stated that the revised Merger Guidelines are a response to modern market realities, aiming to ensure transparent and effective protection of the American people from the adverse effects of anticompetitive mergers.
FTC Chair Lina M. Khan expressed that the proposed guidelines align with the agency’s commitment to enforcing federal antitrust laws faithfully and vigorously. Khan stressed that the new guidelines are informed by thousands of public comments, encompassing various stakeholders such as healthcare workers, farmers, patient advocates, musicians, and entrepreneurs. The objective is to incorporate critical updates while remaining consistent with the mandates from Congress and existing legal precedents.
Since 1968, the FTC and DOJ have regularly issued and updated merger guidelines to enhance transparency and raise awareness of how they approach mergers and acquisitions. The latest draft guidelines build upon the frameworks outlined in previous versions and introduce 13 core principles that will guide the agencies when evaluating whether a merger is unlawfully anti-competitive:
- 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 agencies’ revisions aim to:
- Align with the legislation passed by Congress and interpreted by the highest courts.
- Increase transparency in their approach.
- Adopt frameworks that reflect the realities of the modern economy and leverage the best analytical tools available.
The proposed guidelines have undergone multiple amendments since their initial release in 1968, with revisions made in 1982, 1984, 1992, 1997, 2010, and 2020. In January 2022, the FTC and DOJ initiated a broad evaluation of potential updates and revisions to the Horizontal Merger Guidelines (issued in 2010) and the Vertical Merger Guidelines (issued in 2020).
The formulation of these proposals followed a public comment period, which received feedback from over 5,000 individuals and entities, including consumers, workers, state attorneys general, academics, businesses, trade associations, legal practitioners, and entrepreneurs.
The FTC voted unanimously (3-0) to approve the draft Merger Guidelines. Chair Khan, Commissioners Rebecca Kelly Slaughter, and Alvaro M. Bedoya issued separate statements, each supported by the other commissioners.
The public is encouraged to comment on the draft guidelines for 60 days, with the deadline set for September 18. This critical feedback will help shape the final version of the Merger Guidelines, which will play a crucial role in ensuring fair competition and safeguarding the interests of consumers and businesses in the ever-evolving modern economy.
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