FTC and DOJ’s new Merger Guidelines formalize aggressive approach to antitrust enforcement
The Federal Trade Commission (FTC) and US Department of Justice (DOJ) recently announced new Merger Guidelines, signaling the continuation of the vigorous enforcement agenda seen since the beginning of the Biden Administration.
The Merger Guidelines are intended to describe the procedures and practices that antitrust agencies most often use to investigate whether mergers and acquisitions potentially violate the US antitrust laws. Though the Guidelines are not law, they are used as a roadmap of the likely antitrust review process and to identify the areas of potential concern that merging parties could expect during premerger review.
Similar to the draft previewed by the agencies during summer of 2023, the final Guidelines reflect a significantly more aggressive enforcement agenda and describe a broad range of potential – and sometimes novel – theories under which transactions will be evaluated for potential anticompetitive effects.
Companies are encouraged to work with their antitrust counsel to assess whether a proposed transaction may be subject to enhanced scrutiny under the agencies’ broad potential theories of harm and/or face a lengthy review period that could potentially impact deal timing. Early planning and careful preparation are key.
Specifically, the Guidelines state that mergers and acquisitions raise a rebuttable “presumption of illegality” when they increase concentration in an already “concentrated” market – but the threshold for a “concentrated” market is materially lower than in prior iterations of the Guidelines. By increasing emphasis on market shares and market structures, the new Guidelines indicate a shift back to 1950s- and 1960s-era policies and reflect a view that more recent merger policy has been unduly lax.[1]
The agencies also state that mergers can “violate the law” if they:
- Eliminate substantial competition between firms
- Increase the risk of coordination among market participants
- Eliminate a potential entrant in a concentrated market
- Create a firm that may limit access to products or services that rivals use to compete
- Entrench or extend a dominant position in a marketplace, and/or
- Substantially lessen buyer competition for workers, creators, suppliers, or other providers.
The Guidelines also preview that the agencies will pay particularly close attention to:
- Killer acquisitions and mergers that eliminate potential or emerging entrants
- Vertical and portfolio-expanding transactions
- Tech deals involving platforms and/or ecosystems
- Healthcare deals
- Mergers in markets undergoing consolidation
- Serial acquisitions and roll-up strategies employed by private equity firms
- Mergers affecting labor markets, and
- Partial ownership or minority interest acquisitions that affect a firm’s competitive incentives.
Moreover, the Guidelines’ discussion of these issues highlights novel theories the agencies are pursuing in mergers cases. In particular, the commentaries on potential competition, serial acquisitions, and labor markets fall well outside the bounds of the standard mergers analysis that was prevalent until relatively recently. Businesses are encouraged to account for these novel theories when evaluating potential transactions and planning their advocacy.
Interestingly, despite the assertive tone of the new Guidelines, the vast majority of transactions reported to the agencies under the current Administration have been cleared after the initial 30-day waiting period without significant inquiry or challenge. In Fiscal Year 2022, the most recent year for which merger investigations data is available, the agencies challenged only 1.65 percent of reported transactions – which is fewer than any year under the Bush, Obama, or Trump Administrations. With advanced planning and careful attention to these areas of potential antitrust concern, deals are still clearing antitrust review.
Learn more about the implications of the Guidelines by contacting any of the authors or your usual DLA Piper relationship attorney.
[1] Under the new Guidelines, a merger may be at risk if it results in a market share of 30 percent or more or an Herfindahl-Hirschman Index of 1800 or more.
