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The Federal Trade Commission and the Justice Department’s antitrust division on Wednesday announced long-awaited new guidance on how to enforce the merger law.
The new guidelines, currently in draft form, summarize the agencies’ push to keep pace with the digital age and a changing marketplace. The suggested rules apply to both vertical and horizontal merge operations. Nearly two years ago, the FTC voted to withdraw an earlier version of vertical merger guidelines issued in 2020, citing flaws.
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A vertical merger is a transaction between two companies that are often in different parts of an industry’s supply chain, According to the Federal Trade Commission. By contrast, horizontal mergers involve companies that compete with or are in a similar segment of the market.
Microsoft Proposed $ 68.7 billion purchase Activision Blizzard An example of vertical consolidation, because Microsoft distributes games through Xbox consoles and streaming services, while Activision creates games. The FTC challenged that deal, arguing it was anticompetitive, but a court last week refused to grant the regulator’s request to stop it.
The Federal Trade Commission, headed by Lena Khan, has been more aggressive in trying to prevent big tech from expanding further, while the Justice Department’s antitrust division, led by Assistant Attorney General Jonathan Kanter, has also stepped up its activity.
Both agencies stressed the importance of updating enforcement efforts to reflect the modern economy even if it means losing more cases.
In the new guidelines, they outline 13 points they will use to assess whether the merger should be banned:
1. Mergers must not significantly increase concentration in highly concentrated markets.
2. Mergers should not eliminate substantial competition between firms.
3. Mergers must not increase coordination risk.
4. Mergers should not exclude a potential participant in a concentrated market.
5. Mergers should not significantly reduce competition by creating a company that controls products or services that its competitors may use to compete.
6. Vertical mergers must not create market structures that prevent competition.
7. Mergers must not lead to the consolidation or expansion of a dominant position.
8. Mergers should not increase the trend towards concentration.
9. Where a merger is part of a series of multiple acquisitions, the agencies may examine the entire chain.
10. When a merger involves a multi-pronged platform, the agencies shall consider competition between platforms, on a platform, or to replace a platform.
11. Where a merger involves competing buyers, the agencies consider whether it can significantly reduce competition between other workers or sellers.
12. When an acquisition involves partial ownership or minority interests, agencies consider its effect on competition.
13. Mergers should not significantly reduce competition or tend to create a monopoly.
the 2020 The guidelines do not explicitly discuss the impact on competition for workers. The new language also seems to address issues with cross-platforms such as Amazon that serve consumers and businesses.
Agencies may expand the types of deals they review, and may be looking at a series of deals rather than a single merger. The FTC has already started down this path, suing Facebook parent company Meta in 2020 based on a number of acquisitions of smaller competitors like Instagram and WhatsApp as a strategy to maintain its alleged monopoly power.
A senior FTC official told reporters in a briefing Tuesday that the guidelines should give justices the clarity they’ve asked for in the past when it comes to merger law, an issue of particular interest to judges who rarely face antitrust cases.
Federal Trade Commission He said In 2021, it will work on new guidelines with the Department of Justice, after voting to withdraw the most recent iteration. The then-Democratic majority said the 2020 guidelines “adopted a particularly flawed economic theory regarding the purported pro-competitive advantages of mergers, despite having no basis for support in law or market realities,” according to press release on time.
In the nearly two years since those guidelines were repealed, agency staff have faced repeated questions about when a new set of rules will be available.
On the call with reporters, the FTC official and a senior DOJ official said the guidelines reflect their updated approach to enforcement of the merger law, stressing that the law itself hasn’t changed. They said the agencies evaluated more than 5,000 comments they received when initiating the project.
The public has until September 18 to provide comment on the draft guidelines. Agencies will then review those comments as they consider revisions before final publication.
Once the new guidelines are finalized, the longevity of the new guidelines could depend on political power dynamics after the next presidential election in 2024. After all, the FTC voted to withdraw the latest version of the guidelines just over a year after they were officially released. .
WATCH: An FTC court ruling explains why vertical deals are so difficult to challenge
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