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A Fresh Take

Insights on M&A, litigation, and corporate governance in the US.

| 6 minutes read

Proposed New U.S. Merger Guidelines: Making Old Ideas New Again

The U.S. Department of Justice Antitrust Division (“DOJ”) and Federal Trade Commission (“FTC”) yesterday released a draft of revised Merger Guidelines (“draft Guidelines”) that detail the agencies’ approach to merger analysis. While the draft Guidelines are a significant departure from the previously operative 2010 Horizontal Merger Guidelines (“2010 Guidelines”) and 2020 Vertical Merger Guidelines, they are consistent with the expansive enforcement approach undertaken by the current DOJ and FTC administrations. We summarize below the primary takeaways.

The Guidelines are in draft form but provide key insights.  The draft Guidelines have been released for public comment and are not yet final. However, the draft provides insights into the current DOJ and FTC leadership’s approach to merger review. Final Guidelines, which are expected to be largely consistent with the draft version, may be published before the end of the year. The 2010 Guidelines were published approximately four months after their draft was released for public comment.

Expansive approach to merger analysis gives the agencies maximum flexibility to find potential anticompetitive harm. The draft Guidelines take a broad view of potential theories of anticompetitive harm and discount potential benefits associated with mergers. Additionally, they take specific and explicit aim at companies in the tech space. The draft Guidelines are essentially 13 lenses through which the DOJ or FTC could view a transaction and find potential harm to competition. In particular:

  • Greater reliance on market shares and market concentration levels. The DOJ and FTC propose significantly lowering the concentration threshold, as measured by the Herfindahl-Hirschman index (“HHI”), at which they presume a merger is anticompetitive. The 2010 Guidelines presumed harm at an HHI of 2,500 if the increment in HHI is greater than 200; the new draft Guidelines instead presume harm at an HHI of 1,800 if the increment is greater than 100.  The draft Guidelines also provide that a merger that significantly increases concentration and results in a firm having just 30% market share is presumptively anticompetitive. While the Guidelines identify other factors for evaluating competition, these have been relegated to an appendix in favor of elevating market shares and concentration levels. These changes mark a return to the more formalistic analysis that was prevalent prior to the 1980s.
  • Increased focus on potential competition. The draft Guidelines describe a new framework for how the agencies will evaluate a merger’s impact on actual and perceived potential competition and detail very broad categories of objective and subjective evidence considered relevant to their analysis. In support of this expansive approach, the draft Guidelines cite a footnote from a concurring opinion in a Supreme Court case from the 1970s (United States v. Falstaff Brewing Corp) that states an explicit preference for “internal growth over acquisition,” suggesting that the agencies are prepared to second-guess more companies’ everyday make-versus-buy decisions. The Guidelines also provide that an acquisition of a potential competitor can be anticompetitive while at the same time discounting the competitive significance of other similarly situated potential entrants.
  • Labor market focus made explicit. The 2010 Guidelines applied the same framework for review of mergers between competing buyers as for mergers between competing suppliers.  The draft Guidelines, however, include a lengthy discussion of labor market issues and indicate that “the level of concentration at which competition concerns arise may be lower in buyer markets than in seller markets” because of unique features in certain buyer markets (like labor markets), where the agencies state switching costs are high.
  • Enhanced scrutiny of “vertical” transactions along the supply chain. The agencies (under the prior administration) jointly released Vertical Merger Guidelines just three years ago, and the FTC withdrew its support for them fifteen months later. Like those Vertical Merger Guidelines, the new draft Guidelines highlight that the agencies will evaluate whether mergers could raise rivals’ costs, provide access to rivals’ competitively sensitive information, or foreclose competitors.  But unlike the prior Vertical Merger Guidelines, the new draft does not acknowledge the potential benefits of vertical integration.  The draft Guidelines also introduce a market share test: if one of the merging parties has a greater than 50% share of an input used by rivals, the merger is presumed to be anticompetitive. Interestingly, this approach appears to be in conflict with a district court’s recent decision rejecting the FTC’s challenge to the Microsoft/Activision transaction, which held that the agencies have “no short-cut way” to establish that vertical mergers harm competition.
  • Enhanced scrutiny of other transactions not between direct competitors. The draft Guidelines provide a framework for evaluating other transactions that could “entrench or extend” a “dominant” position, broadly defined, including any acquisition by a firm that already has more than a 30% market share. The draft Guidelines provide, for example, that elimination of a nascent competitive threat, increasing barriers to entry, or depriving rivals of scale economies or network effects could entrench a “dominant” position, tending to create a monopoly. The draft Guidelines also indicate that mergers by which the combined firm could “extend a dominant position from one market into a related market,” similar to the portfolio effects theory of harm outlined in the FTC’s recent challenge to Amgen’s proposed acquisition of Horizon Therapeutics, could result in anticompetitive harm. 
  • Enhanced scrutiny of roll-ups.  The draft Guidelines indicate that a series of small acquisitions in related businesses may be analyzed as a whole to ascertain whether the transactions in aggregate affect competition, even if no single acquisition on its own would be unlawful. This echoes statements from FTC and DOJ leadership in recent years criticizing financial sponsor roll-up strategies.
  • Enhanced scrutiny of minority investments.  The draft Guidelines identify new circumstances in which partial ownership or other minority investments – including acquisitions of non-voting interests – could harm competition, including when partial ownership could influence the target firm’s conduct, reduce incentives to compete, or facilitate access to a rival’s competitively sensitive information. 
  • Increased skepticism of efficiencies. Although they set a rigorous standard of proof for merger-specific efficiencies, the 2010 Guidelines credited the potential for mergers to “enhance the merged firm’s ability and incentive to compete, which may result in lower prices, improved quality, enhanced service, or new products.” The new draft Guidelines are more skeptical of efficiencies, indicating for example that cost savings that result from elimination of competition in procurement will not be credited.
  • “Catch-all” provision for any other potential harms.  The draft Guidelines include a “catch-all” for mergers that might harm competition other than in the myriad ways specifically enumerated, underscoring the flexibility the DOJ and FTC have in their approach to merger analysis. For instance, in a footnote, the draft Guidelines state that a merger may be unlawful even if it does not reduce head-to-head competition between rivals if it threatens to cause the exit of an existing market participant, such as in the case of a leveraged buyout that could put the target at financial risk.

Ultimate import of Guidelines will be clarified as mergers are litigated. The 2010 Guidelines have been widely regarded as a success for the DOJ and FTC. Courts regularly cite the 2010 Guidelines as persuasive authority, and the DOJ and FTC win rate for fully litigated cases increased materially following adoption of the 2010 Guidelines. A 2021 retrospective analysis found that the DOJ and FTC collectively won 79% of fully litigated merger challenges in the decade following release of the 2010 Guidelines, as compared with 62% in the decade prior to their release.

The 2010 Guidelines reflected a consensus framework consistent with both the law and decades of bipartisan agency practice. In contrast, the draft Guidelines predominantly rely on case law that predates modern merger analysis: 92 of 119 case citations predate the agencies’ joint 1982 Horizontal Merger Guidelines, which outlined a general framework for merger analysis that has remained in place for more than 40 years, including through the 2010 Guidelines. While the DOJ and FTC may intend for the draft Guidelines to facilitate merger challenges – particularly following a string of recent losses – parties defending transactions are likely to cite modern judicial precedent and emphasize the nonbinding nature of the Guidelines. It is unclear whether the DOJ and FTC will find the same success under these revised Guidelines.

Expansive antitrust review and enforcement uncertainty underscore the need for early antitrust assessment. As has been the case throughout the current administration, merging parties should continue to expect close scrutiny, even of mergers that are not between direct competitors. The DOJ and FTC draft Guidelines come amid a global trend of instituting more aggressive merger enforcement, including the UK Competition & Markets Authority (“CMA”) Revised Merger Assessment Guidelines in 2021 and China’s State Administration for Market Regulation (“SAMR”) Implementing Regulations in March 2023. Early antitrust assessment is critical for anticipating global review timelines and outcomes, informing both transaction negotiations and antitrust strategy – including the possibility of litigation.

If you have questions, contact Bruce McCulloch, Andy Ewalt, Jamillia Ferris, Mary Lehner, Jenn Mellott, Laura Onken, Meghan Rissmiller, Jan Rybnicek, and Justin Stewart-Teitelbaum. To read more about other antitrust developments, please refer also to our Global antitrust in 2023: 10 key themes report.

Summer associate Ian Allen also contributed to this article.


regulatory, m&a, antitrust and competition, litigation