The U.S. Department of Justice and the Federal Trade Commission released the final version of their new merger guidelines for determining whether corporate combinations are anti-competitive and should be blocked by the federal government.
While the guidelines are not binding, they are designed to inform agency staff, plaintiffs, and the courts of the agencies’ approach toward mergers that dampen competition in the modern economy. Additionally, the guidelines detail how federal agencies will evaluate proposed mergers under federal law.
In a joint press release, the DOJ and FTC noted the guidelines deal with “the dynamic and complex nature of competition ranging from price competition to competition for the terms and conditions of employment, to platform competition.”
The 11 guidelines, as the DOJ and FTC stated last July, address the potential harm from a deal along “any dimension of competition,” including when an otherwise competitive tie-up reduces competition for workers.
“These finalized guidelines provide transparency into how the Justice Department is protecting the American people from the ways in which unlawful, anticompetitive practices manifest themselves in our modern economy,” said Attorney General Merrick B. Garland.
White House economist Lael Brainard, former vice chair of the Federal Reserve, said the guidelines were “an important step to lower costs for consumers, ensure a level playing field for small businesses, and ensure antitrust enforcement is fit for purpose in today’s economy. ... “For too long, unchecked consolidation has meant big corporations getting bigger, giving them the power to raise prices for Americans and provide consumers with fewer options.”
Fidelity to Precedent
FTC Chair Lina Khan emphasized the 2023 guidelines “ensure fidelity to statutory text and precedent.”
But a client advisory on December 13 from Skadden, Arps, Slate, Meagher & Flom said, “In the hope that courts will follow them, the agencies cite a wealth of case law in footnotes. ... But the guidelines do not mention many relevant cases from the last several decades where judges grappled with exactly this challenge of applying the competition laws to modern market dynamics.”
The Skadden, Arps advisory also noted that “rather than establishing a flexible framework of economic analysis for assessing competitive effects, the guidelines focus heavily on presumptions of harm.”
“The agencies cite a wealth of case law in footnotes. ... But the guidelines do not mention many relevant cases from the last several decades where judges grappled with exactly this challenge of applying the competition laws to modern market dynamics.”
Sakdden, Arps, Slate, Meagher & Flom client advisory comment
The final merger guidelines are mostly unchanged from the draft proposal released in July. The biggest difference is the exclusion of a guideline for assessing vertical transactions.
“The intensified regulatory and legal challenges to mergers and strategic partnerships under the Biden Administration could temper external growth and limit scale efficiency opportunities, pressuring cash flows,” Fitch Ratings said in a release in early June. Issuers that litigate regulatory disputes could face operational uncertainty and distraction.
In the courts, the FTC and DOJ “have suffered repeated defeats in the last several years, involving [court] cases where they relied on the kinds of theories they promote in the guidelines,” wrote Skadden, Arps attorneys.
However, the agencies and other international governments have been relatively effective at getting companies to drop proposed transactions. On Monday, Adobe and Figma ended plans to combine after European regulators pushed back on the $20 billion deal.
There has been no word yet on whether the DOJ or FTC plan to try to block the $14 billion takeover of U.S. Steel by Japan-based Nippon steel, announced on Monday. However, Democratic Senator John Fetterman of Pennsylvania vowed to block the transaction, saying, “It’s absolutely outrageous that U.S. Steel has agreed to sell themselves to a foreign company.”