Back To The Future: FTC And DOJ Issue Draft Revised Merger Guidelines

• Published date: 25 July 2023
• Law Firm: Milbank LLP
• Author: Ms Fiona Schaeffer, Adam Di Vincenzo, Richard Parker, Grant Bermann, Andrew S. Wellin, Daniel J. Rosenthal, Alix Hudon and Jennifer Cascone Fauver

On July 18, 2023, the Federal Trade Commission and the US Department of Justice issued a draft of their much anticipated Revised Merger Guidelines. The revisions are the first update to the agencies' horizontal merger guidelines in over thirteen years and the first guidance on vertical mergers since the 2020 Vertical Merger Guidelines were withdrawn in 2021. The Revised Guidelines reflect the more aggressive and novel theories of harm that the agencies are currently using to analyze mergers and acquisitions, and, in several ways, reflect a substantial departure from and expansion of the 2010 Horizontal Merger Guidelines.

In summary:

• The Revised Guidelines attempt to return merger enforcement to some of the standards articulated by the agencies in their first Merger Guidelines from1968. The 2010 Guidelines used market shares and concentration statistics as a starting point for the agencies' analysis. The Revised Guidelines, however, take antitrust "back to the future" ' the agencies will now deem a broader range of mergers to be presumptively unlawful.
• The Revised Guidelines expand on the 2010 Guidelines in several areas. The Revised Guidelines explain how the agencies will analyze mergers involving potential competition, competition for employees and technology platforms. Transactions involving "dominant" firms and platforms will receive special treatment and enhanced scrutiny under the Revised Guidelines. The Revised Guidelines also address vertical mergers and non-vertical mergers that might disadvantage the merging parties' competitors.
• The Revised Guidelines do not eliminate the consumer welfare standard or the use of economic analysis in determining a merger's effects. Rather, by relying on a series of presumptions to determine a merger's legality, the agencies can replace their own economic analysis with less burdensome evidence'e.g., measures of and trends in concentration; a firm's history of prior transactions; or ordinary course business documents. The practical effect is to shift the economic analysis to the merging parties, who must prove that the merger does not harm competition. In practice, however, the merging parties already confront this challenge.

Overall, the Revised Guidelines suggest that more transactions will require more time to complete. This has practical implications for a deal's terms, such as longer outside dates and stronger commitments to litigate. The ultimate decisionmakers, however, remain the federal district courts. Unlike other jurisdictions, US antitrust agencies cannot unilaterally stop a merger; they are required to seek judicial intervention. Over the last two years, the agencies have tested some of the proposed changes to the Guidelines before district court judges, with mixed results. District courts have been unwilling to credit novel theories that the agencies are unable to support with persuasive evidence. The takeaway, so far, is that well-prepared merging parties with strong evidence continue to consummate their deals.

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