US Antitrust Agencies Release Final Revised Merger Guidelines

On December 18, 2023, the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) (each an Agency, and collectively, the Agencies) released the final version of revised Merger Guidelines (the Guidelines), a set of principles Agencies use in their review of mergers and acquisitions.¹ The Agencies previously released draft versions of the Guidelines in July 2023 (the Draft Guidelines).² As a reminder, the Guidelines are not, and do not create, binding law. Rather, they are designed to “provide transparency into the [A]gencies’ decision-making process,” ³ and reflect current enforcement priorities, with big tech and private equity transactions clearly in mind.

July 2023 Draft Guidelines

We covered the release of the Draft Guidelines in-depth in a prior client alert. Major takeaways included a significant lowering of the thresholds for determining market concentration levels sufficient to create a presumption of anticompetitive effects. Further, while the Draft Guidelines listed the forms of competitive harms that the Agencies consider in their reviews, the Draft Guidelines often did not provide the analytical framework the Agencies would use in their evaluation. Also absent was any discussion of the analytical framework for evaluating transactions in innovation markets.

Finally, the Draft Guidelines extensively cited case law, presumably in an attempt to tie the Agencies’ more aggressive enforcement priorities to binding legal precedent. However, the majority of cases cited were significantly dated and their use in the Draft Guidelines stands in tension with the Agencies’ stated objective of “reflect[ing] the realities of our modern economy and the best of modern economics.”⁴

In the intervening months, the Agencies solicited comments from the public and held a series of workshops with members of the antitrust defense bar, state enforcers, academia, and think tanks.⁵ According to the Agencies, they received nearly 30,000 comments on the draft version of the guidelines from “consumers, workers, academics, interest organizations, attorneys, enforcers, and many others across various sectors of the American economy.”⁶

December 2023 Final Guidelines

Yet aside from a number of line edits, changes to the structure and other superficial adjustments, the substance of the final version of the Guidelines appears to be largely unchanged from the Draft Guidelines. Notably, the lower thresholds at which Agencies will presume market power remain unchanged, as is the Agencies’ interest in roll-up acquisitions, platform markets, and labor issues.

More Neutral Tone

While the substance remains largely the same, the Agencies do appear to have adjusted the Guidelines toward a somewhat more neutral and analytical tone. For example, Guideline 1 previously stated “[t]he Agencies examine whether a merger between competitors would significantly increase concentration and result in a highly concentrated market. If so, the Agencies presume that a merger may substantially lessen competition based on market structure alone.”⁷ The final version of Guideline 1 now explicitly acknowledges that evidence of market concentration can be rebutted: “[m]arket concentration is often a useful indicator of a merger’s likely effects on competition. The Agencies therefore presume, unless sufficiently disproved or rebutted, that a merger between competitors that significantly increases concentration and creates or further consolidates a highly concentrated market may substantially lessen competition.” ⁸

Fewer References to Older Cases

The Agencies also deleted a number of citations to out-of-date and decades-old cases that offered only weak support for the Guidelines, pivoting in the final version to more recent case law (although several older citations are still present) in an apparent effort to boost the credibility of the Guidelines with the federal courts. This is not surprising given the Agencies’ string of recent losses in federal court, which often included rejections of the Agencies’ more novel legal theories.⁹

Streamlined the Analytical Framework for Vertical Issues

The Agencies also restructured the guidelines, consolidating the 13 Draft Guidelines to 11 in the final version. This restructuring did not fundamentally alter the content or substance of these guidelines. The analytical framework on vertical mergers (previously in Guideline 6) was folded into an expanded Guideline 5, which now covers foreclosure in vertical inputs, distribution services, complementary products and other related products. Similarly, the catch-all Guideline 13 is now gone, but nearly identical language is retained elsewhere, with a caveat that the guidelines are not exhaustive.

Continued Interest in Specific Industries and Protecting Nascent Competition

As with the Draft Guidelines, the Agencies have inserted language with specific industries apparently in mind. For example, in Guideline 2, the Agencies added language explaining that the elimination of substantial competition between firms can “include competition to research and develop products or services, and the elimination of such competition may result in harm even if such products or services are not yet commercially available.”¹⁰ This additional language, at least in part, is targeted at the life science industry amid FTC concerns with “killer acquisitions,” as exemplified by the FTC’s recent enforcement to block the Sanofi/Maze transaction (covered here).

Similarly, the Guidelines emphasize the Agencies’ interest in transactions between incumbents and “nascent competitors,” particularly in the tech space. Guideline 6, which relates to mergers that may entrench or extend dominant positions, defines nascent competitors more broadly than as just direct competitors to the incumbent and now includes firms that serve niche customer segments, offer solutions that only partly overlap with the incumbent, or offer distinct products to the incumbent’s customer base. The Agencies appear to be particularly focused here on nascent competitors in tech transactions.¹¹ The Guidelines outline key factors “such as network effects, scale economies, or switching costs,” while noting that “nascent threats may be particularly likely to emerge during technological transitions.”¹²

Key Takeaway

As predicted, despite tens of thousands of comments and extended workshop sessions, the Agencies largely preserved the underlying substance of the Draft Guidelines, maintaining a document that articulates an enforcement approach that provides maximum flexibility to challenge an array of transactions in various factual contexts. Whether these final Guidelines will be persuasive to federal courts reviewing Agency merger challenges remains to be seen, but we predict that many of the Agencies’ enforcement priorities embodied in this document will continue to face skepticism in the federal courts.

 

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^[1] DOJ, Justice Department and Federal Trade Commission Release 2023 Merger Guidelines (Dec. 18, 2023), available at https://www.justice.gov/opa/pr/justice-department-and-federal-trade-commission-release-2023-merger-guidelines (Press Release); DOJ/FTC, 2023 Merger Guidelines (Dec. 18, 2023), available at https://www.justice.gov/d9/2023-12/2023%20Merger%20Guidelines.pdf (the Guidelines).

^[2] DOJ/FTC, 2023 Draft Merger Guidelines (July 19, 2023), available at https://www.goodwinlaw.com/en/insights/publications/2023/07/alerts-otherindustries-us-antitrust-agencies-release-revised (the Draft Guidelines).

^[3] Id.

^[4] DOJ/FTC, FTC and DOJ Seek Comment on Draft Merger Guidelines (July 19, 2023), available at https://www.ftc.gov/news-events/news/press-releases/2023/07/ftc-doj-seek-comment-draft-merger-guidelines.

^[5] DOJ, Public Workshops on the 2023 Draft Merger Guidelines, available at https://www.justice.gov/atr/public-workshops-2023-draft-merger-guidelines.

^[6] See Press Release.

^[7] Draft Guidelines at p. 3.

^[8] Guidelines at p. 2.

^[9] See Fed. Trade Comm'n v. Meta Platforms Inc., 654 F. Supp. 3d 892 (N.D. Cal. 2023); see also Fed. Trade Comm'n v. Microsoft Corp., No. 23-CV-02880-JSC, 2023 WL 4443412 (N.D. Cal. July 10, 2023).

^[10] Guidelines at p. 7.

^[11] Goodwin, Antitrust & Competition Technology Quarterly Update Q2 2023 (Aug. 24, 2023), available at https://www.goodwinlaw.com/en/insights/publications/2023/08/insights-technology-antc-quarterly-update-q2-2023.

^[12] Guidelines at p. 20.

 

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