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Quick Hits

  • The DOJ and FTC proposed new Horizontal Merger Guidelines, which are very different from previous versions.
  • The proposed Guidelines are subject to public comment until September 18.
  • If adopted after comment, far more mergers would be challenged. The proposed guidelines suggest challenging deals with much lower combined market shares and a far greater array of potential market effects.

Today the Federal Trade Commission and the Antitrust Division of the Department of Justice released a proposed set of new Horizontal Merger Guidelines, to replace the current version adopted in 2010. The proposed Guidelines are open for public comment for at least 60 days, until September 18. If adopted, the Guidelines will be a radical departure from versions of the Guidelines that have existed for several decades.  Some of the more radical proposals include:

  • A presumption of illegality for any merged firm with a combined share of merely 30%, if there is even a relatively small change in the market concentration, which the proposed Guidelines say would be a change on the Herfindahl Hirschman Index of greater than 100 points. 
    • For example, a firm with a 29% market share acquiring a competitor with a 2% market share would be presumed illegal.
  • Suggesting illegality of mergers that “entrench” or “extend” a “dominant” firm’s position. The proposed Guidelines suggest a firm could have a “dominant” position with a market share as low as 30%. 
    • They suggest that entrenchment could happen by increasing barriers to entry, increasing switching costs, interfering with use of competitive alternatives, depriving rivals of economies of scale, eliminating a nascent competitive threat, or “in any other way.” 
    • The proposed guidelines suggest extension of market power could occur by, for example, bundling, conditioning, or otherwise linking sales of two products, even if such conduct would not violate Section 2 of the Sherman Act.
  • Suggesting a merger could be illegal if it “furthers a trend” towards market concentration. Unfortunately, the proposed Guidelines offer no solid guidance on what measures would constitute a “trend” or what level of increase in that trend would be challenged, instead leaving plenty of room for argument by pointing to “market characteristics” and “other facts.”
  • Suggesting a merger, not otherwise illegal, could be found so for being part of a series. Again, the Guidelines provide no reliable (i.e., numerical) guidance on how to evaluate whether a particular merger is part of an offensive series. 
  • Suggesting a merger’s impact on labor might make the transaction illegal. Historically, reducing the costs of labor have been viewed as potential efficiencies, since reducing costs should also reduce prices. The new Guidelines make explicit that this Administration wishes to stand that on its head.
  • A new section on platforms, which suggests that even effects on competition on a single platform may make a merger illegal.

These are six of the most radical changes proposed in the thirteen proposed guidelines. Some of the rest are quite similar to existing approaches, while others have significant differences. Also notable is Guideline 13, used as catchall for “any other” merger that may substantially lessen competition. That may be the most obvious case of the proposed Guidelines failing to provide actual guidance to parties considering a transaction. Many other of the new proposals also offer little to inform parties proposing to merge. 

Remember that for now, these are just proposed Guidelines. They are sure to engender a host of public comments, and may be revised after consideration of those comments.

Watch this space for more in depth analysis and updates on the status of the proposed Guidelines.