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New Merger Guidelines – What Clues Can We Learn From The Public Comments? – Antitrust, EU Competition


The Biden Administration intends to reshape merger enforcement
as part of its broader initiative to change U.S. antitrust
law.1 In keeping with the Administration’s goals,
the Federal Trade Commission (FTC) and the Department of Justice
Antitrust Pision (DOJ) (collectively, the “Agencies”) are
currently evaluating revisions to their Merger Guidelines. While
not binding law, Merger Guidelines shape merger enforcement more
than any other mechanism because most decision making in contested
mergers occurs within the enforcement agency and parties must
typically exhaust a lengthy agency review process before they can
be heard by a judge.2

Earlier this year, the Agencies issued a request for information
(RFI) to inform their work on the new Merger Guidelines. The RFI
gives significant clues to the direction the Agencies intend to
take.3 The tone of the RFI was not neutral; consistent
with rhetoric from Biden administration enforcers, the RFI all but
presupposes the insufficiency of the current merger guidelines and,
indeed, the past forty years of merger enforcement.4

The comment period closed this spring. The Agencies received
over 5,800 comments, posting around 1,900 of them.5
Hundreds of these comments included detailed analysis and argument
that offered a range of opinions on how the Agencies should analyze
mergers. In anticipation of the Agencies’ issuance of new
proposed Merger Guidelines, we evaluate the public comments
submitted this spring and provide insight into the deep pergence of
viewpoints. We also explain what to expect next in the process.

Trends

The RFI included 15 broad categories, ranging from questions of
general approach such as “Purpose, Harms, and Scope” to
more targeted issues including “Digital Markets” and
“Innovation and IP.” By a significant margin, the most
frequently commented upon topics were, unsurprisingly, the general
topics namely “Purpose, Harms, and Scope” and “Types
and Sources of Evidence.” Within the more targeted questions,
the most popular topics were “Special Characteristics
Markets,” “Labor and Monopsony,” and “Digital
Markets.” Each of these latter topics received a
disproportionate number of comments, reflecting the significant
public debate surrounding these issues.

A broad array of inpiduals and organizations from across the
political spectrum commented. No clear majority prevailed on any
issue. Many comments expressed support for significant changes,
including those that argued for deemphasizing (or even abandoning)
the consumer welfare standard.6 However, there was also
a strong (if smaller) contingent of comments arguing against any
reforms at all and a similar number that supported limited,
incremental changes to the Merger Guidelines. Many of the comments
supporting broad change were from progressive advocacy
organizations and labor groups, including the Center for American
Progress, the American Economic Liberties Project, the American
Federation of Teachers, and the Communication Workers of America.
Comments opposing sweeping changes originated largely from major
industry groups, bar associations, and conservative- or
libertarian-leaning think tanks including the United States Council
for International Business, PhRMA, the International Bar
Association, and Global Antitrust Institute.

Smaller industry groups tended to break both ways, depending on
their particular position in the economy. Representatives of
smaller entities low on the supply chain, especially within the
healthcare and agriculture sectors—for example R-CALF USA, a
trade association of live cattle producers, the American College of
Emergency Physicians, and the National Community Pharmacists
Association—advocated for changes to the guidelines and
enforcement priorities that would provide them increased protection
from the Agencies against larger upstream purchasers including meat
packers, large hospital chains, and PBMs, who they argue exert
monopsony power and have grown through consolidation. On the other
hand, representatives for small startup companies and
entrepreneurs, including the Small Business & Entrepreneurship
Council and Engine Advocacy, worry that changes to the guidelines,
especially strict rules regarding nascent competition or vertical
transactions, will cut off acquisition as a viable exit option for
founders and investors in startups, leading to decreased funding
and innovation.

Distinguishing Horizontal and Vertical Guidelines

While a handful of comments argued that the distinction between
vertical and horizontal merger guidelines should be abolished, most
comments addressing this topic (from all political perspectives)
recognized the value of guidelines tailored to these different
categories of mergers. Many stated that this approach was most
appropriate when enforcers used these frameworks to analyze the
horizontal and vertical aspects of a particular transaction, rather
than attempting to define a transaction as purely
“vertical” or “horizontal.” The debate about
whether the treatment of efficiencies should continue to differ
between horizontal and vertical transactions—with vertical
efficiencies historically given credence compared to horizontal
efficiencies, which are currently regarded as minimally
persuasive—rages on in the comments. However, the FTC, when
withdrawing its support from the Vertical Guidelines last year
telegraphed that the Democratic majority of Commissioners then felt
that the presumption of vertical efficiencies is inappropriate and
ought to be significantly curtailed.7 While Commissioner
Chopra has now been replaced by Commissioner Bedoya, there is
little reason to expect this change in personnel will change the
FTC’s outlook on this issue. In recent comments to reporters,
the head of the Antitrust Pision indicated that the new guidelines
would reconsider crediting efficiencies in merger reviews, calling
past (favorable) treatment of efficiencies an area where law and
policy perged.

State AGs Push for More Aggressive Enforcement

Several comments were submitted by coalitions of state attorneys
general (AG), including a coalition of 23 (predominantly Democrat)
state AGs led by New York and California. This comment expressed
strongly progressive views, advocating for materially changing the
Guidelines and addressing a supposed trend of under-enforcement
that “may have led to over-concentration.”8
More specifically, their demands include adoption of (1) a
presumption that potential competitor acquisitions are
anticompetitive, (2) Tim Wu’s Attentional-SSNIP test or the
SSNDQ test to address zero-price markets, and (3) more specific
Guidelines for private equity transactions.9

Another notable comment arguing for significant change was
submitted by Colorado AG Phil Weiser (D) and Nebraska AG Doug
Peterson (R), who together serve as co-chairs of the National
Association of Attorneys General Antitrust Committee. AGs Weiser
and Peterson recommended making it easier for the Agencies to
challenge mergers by lowering the level of concentration at which
the Agencies would apply a structural presumption of
anticompetitiveness. They also advocated for a more exacting
standard to credit claimed merger efficiencies, which would make it
more challenging for merging parties to overcome any
presumption.10

Some Cautionary Statements against Overcorrection

Several organizations opposed the calls for more aggressive
enforcement. For example, the International Center for Law and
Economics argued that there is insufficient evidence to support the
presumption that market concentration harms innovation, investment,
and other non-price factors. Other comments argued against
expanding the structural presumption because it would be both a
harmful over-deterrent and inconsistent with existing law, as only
the courts can actually modify the burdens of proof or persuasion
by adopting a presumption.11

Many commenters warned against hasty, dramatic changes in the
name of “reform.” They emphasized the need to evaluate
each transaction inpidually as there is a fine line between
anticompetitive mergers and procompetitive ones and there are
significant error costs associated with over-deterrence. For
example, depending on the nature of the market, concentration can
harm innovation, but it can also lead to higher investment
capabilities ultimately directed toward innovation. Bright-line
rules are incompatible with the wide persity of the modern economy.
The Antitrust Law Section of the American Bar Association echoed
this point, noting that a so-called “trend towards
concentration” could easily reflect efficient market
adjustments rather than a reduction in competition.12
Accordingly, a one-size-fits-all presumption based on concentration
trends would be inappropriate. Many commenters broadly in favor of
the status quo made similar arguments about labor markets,
observing that mergers may reduce demand for labor because of
increased efficiency and laborsaving improvements unrelated to any
increase in labor monopsony power.13

Disagreement on the Need for Market-Specific Rules

Several comments addressed the Agencies’ questions whether
new Merger Guidelines should include industry-specific rules. The
U.S. Chamber of Commerce argued what seemed to be the prevailing
view on this issue: that special rules for certain markets are not
necessary.14 Greg Werden, a former senior economic
counsel at the DOJ, agreed, arguing that the Guidelines should not
commit to particular frameworks for particular
markets.15 Similarly, many commenters argued that the
Guidelines should not identify sectors of the economy in which
mergers are more or less likely to harm competition. Academics from
the University of Maryland argued that focusing on tech companies
is misguided, noting that Big Tech companies account for only 1.5%
of acquisitions, and that acquisitions are one way that tech
companies compete with each other.16 Many acquisitions
of tech startups are designed not to kill competition but to allow
the acquirer to offer better and complementary technology to
compete with other Big Tech companies. The American Investment
Council commented that many specific markets are already closely
scrutinized (e.g., private equity by SEC, labor markets by the
Department of Labor) and do not require special antitrust
focus.17

However, other groups disagreed and commented to support
market-specific rules. A coalition of several prominent labor
organizations advocated for numerous labor-market-specific rules,
including a presumption of market power triggered when an employer
possesses 20% of the relevant labor market.18 This is a
lower threshold relative to what is needed to establish market
power in a goods market, but this comment argues that such a change
is necessary because of differences between goods markets and labor
markets, such as search frictions, reduced (or even negative) labor
supply elasticity, and high switching costs.19 The same
comment also argued for collective bargaining to be used as a
structural remedy where an otherwise permissible merger would
increase labor market concentration.20 The American
Pharmacy Cooperative argued for more specific guidelines regarding
mergers in the healthcare industry.21 At an even more
granular level, the American Hospital Association advocated for
special rules for hospital mergers and argued that the benefits
like increased geographic coverage and efficiency in operations
should receive special consideration in their
field.22

What Comes Next

This public comment period was only the first significant step
toward new Guidelines. For the next step, we expect the Agencies to
release draft Guidelines later this year. In a recent speech,
Assistant Attorney General Jonathan Kanter noted that the Agencies
are “undertaking a major revision to our merger
guidelines” and noted DOJ has read every comment.23
Based on public statements by leadership at the Agencies, and
bolstered by the numerous comments advocating for far-reaching
changes, we expect that these new guidelines will be more
aggressive and interventionist. Kanter noted that the Agencies have
guidelines drafted and are currently canvassing the entire merger
staff at DOJ and FTC to elicit their views “before broadening
the discussion to public comment.”24

Two key questions are on everyone’s mind as we await these
new guidelines. First, how aggressive will they be? Second, how
durable will they be—in other words, how will courts treat
them and will they survive this Administration? While the
Guidelines have enjoyed respect and deference from courts when the
Agencies have brought merger challenges, the Guidelines are not
binding law.25 Rather, they describe the analytical
techniques typically used by the Agencies to evaluate mergers,
rooted in law and practice and guided by the best economic
thinking. A fundamentally prescriptivist recasting of the
Guidelines that breaks from the consensus legal and economic
approaches developed over the last four decades would create
uncertainty, both for parties contemplating mergers and for the
Agencies contemplating enforcement actions. Courts are unlikely to
accept novel theories that contradict decades of precedent. Overly
aggressive Guidelines that are not tethered to economics or
existing case law are also likely to undermine the credibility of
the Agencies with Courts, consumers, and other stakeholders. We can
only wait to see if this Administration will take a more modest
approach to their revisions or if they are willing to risk
converting what has historically been a useful tool for the bench,
the bar, and the business community into just another policy
document subject to the shifting political winds in D.C.

Jose L. Urteaga also contributed to this article.

Footnotes

1. See Client Alert, Charting a New Course
for Antitrust: President Biden’s Executive Order Promoting
Competition in the American Economy
, Morrison Foerster (July
14, 2021) https://www.mofo.com/resources/insights/210714-president-biden-executive-order-antitrust.html

2. Daniel A. Crane, Antitrust Antitextualism, 96
Notre Dame L. Rev. 1205, 1242-45 (2021)

3. U.S. Dep’t of Justice & Fed. Trade Comm’n,
Request for Information on Merger Enforcement (hereinafter
“RFI”) (January 18, 2022) available at https://www.regulations.gov/document/FTC-2022-0003-0001

4. An example of this tone is found in the implication
that current guidelines are insufficient and the Agencies need more
power to police what they identify as unlawful and anticompetitive
conduct. Id. (“A key overriding question is…whether
these [current guidance documents] adequately equip enforcers to
identify and proscribe unlawful, anticompetitive
transactions.”) The 2020 Vertical Merger Guidelines were
officially withdrawn by the FTC citing substantive concerns, and
Assistant Attorney General Kanter who heads the Antitrust Pision
has expressed he shares those concerns, although the DOJ has not
officially withdrawn the guidelines. Federal Trade Commission
Withdraws Vertical Merger Guidelines and Commentary
, Federal
Trade Commission (September 15, 2021) https://www.ftc.gov/news-events/news/press-releases/2021/09/federal-trade-commission-withdraws-vertical-merger-guidelines-commentary
Justice Department Issues Statement on the Vertical Merger
Guidelines | OPA | Department of Justice (September 15, 2021) https://www.justice.gov/opa/pr/justice-department-issues-statement-vertical-merger-guidelines

5. supra note 3

6. E.g.,Comment ID: FTC-2022-0003-0418; Comments arguing against
the consumer welfare standard are in line with previous statements
from current Agency leadership. See Karis Paul,
They should be worried’: will Lina Khan take down big
tech?
, The Guardian (August 2021) https://www.theguardian.com/us-news/2021/aug/14/lina-khan-big-tech-ftc-antitrust

7. Press Release, Federal Trade Commission Withdraws
Vertical Merger Guidelines and Commentary, (September 15, 2021) https://www.ftc.gov/news-events/news/press-releases/2021/09/federal-trade-commission-withdraws-vertical-merger-guidelines-commentary.

8. Comment ID: FTC-2022-0003-0807

9. Id. For additional information on Tim
Wu’s writing on the A-SSNIP test, see Tim Wu, Blind Spot:
The Attention Economy and the Law
, 82 Antitrust L. J. 771
(2019).

10. Comment ID: FTC-2022-0003-0767

13. Comment ID: FTC-2022-0003-0715

14. Comment ID: FTC-2022-0003-1217

15. Comment ID: FTC-2022-0003-0087

16. Comment ID: FTC-2022-0003-0138

17. Comment ID: FTC-2022-0003-1103

18. Comment ID: FTC-2022-0003-1099

19. Robert Pitofsky, New Definitions of Relevant
Market and the Assault on Antitrust
, 90 Colum. L. Rev. 1805,
1807 (1990) (“Unfortunately, no aspect of antitrust
enforcement has been handled nearly as bad as market
definition.”)

20. supra note 17

21. Comment ID: FTC-2022-0003-0487

22. Comment ID: FTC-2022-0003-0279

23. Jonathan Kanter, AAG, Antitrust Pision, Dep’t of
Justice, Respecting the Antitrust Laws and Reflecting Market
Realities (Sept. 13, 2022), https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-delivers-keynote-speech-georgetown-antitrust.

24. Id.

25. See FTC v. Staples, 970 F. Supp. 1060,
1081­-1082 (D.D.C. 1997) (“The Merger Guidelines, of
course, are not binding on the Court, but, as this Circuit has
stated, they do provide ‘a useful illustration of the
application of the HHI,’…and the Court will use that guidance
here.”) (quoting FTC v. PPG Indus., Inc., 798 F.2d 1500
(D.C.Cir. 1986))e.

Because of the generality of this update, the information
provided herein may not be applicable in all situations and should
not be acted upon without specific legal advice based on particular
situations.

© Morrison & Foerster LLP. All rights reserved



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