By: Joseph A. Kuzneski, Meaghan L. Krupa
On January 18, 2022, the Federal Trade Commission (the “FTC”) and the Antitrust Division of the Department of Justice (the “DOJ”) announced the launch of a joint public inquiry aimed at strengthening and modernizing antitrust enforcement in the United States. This inquiry is motivated, in part, by the agencies’ concern that many industries are becoming more consolidated, and that this trend towards less competitive markets (and the associated negative effects on prices, wages, quality and innovation, among others) is likely to continue or worsen given the recent surge in merger filings.
In connection with this inquiry, the FTC and the DOJ have requested input and information (including specific examples) from the public to inform revisions to the merger guidelines, which provide the framework for analyzing mergers and acquisitions under the federal antitrust laws.[1] These agencies acknowledge that these guidelines may not have kept pace with economic and technological developments, and that certain markets may fall outside this framework altogether. Accordingly, the FTC and the DOJ seek insight from a variety of stakeholders, including businesses, franchisees, economists, attorneys, academics, unions, employees and consumers, among others, on ways to modernize the guidelines to more closely align with the current economy and to better detect and deter anticompetitive transactions. The agencies’ Request for Information on Merger Enforcement (the “RIF”) is available here.
A key question posed by the RIF is “how effectively the current guidance documents capture the competitive issues raised by mergers today, and whether these documents adequately equip enforcers to identify and proscribe unlawful, anticompetitive transactions.” Among other areas of inquiry, the FTC and the DOJ seek information on the following topics, as more thoroughly described in the RIF:
- the purpose, harms and scope of antitrust review, including whether historical distinctions between horizontal and vertical transactions provide too narrow a framework and should be revisited;
- the types and sources of evidence used to determine whether transactions are anticompetitive, including whether there exist non-price effects that are not sufficiently analogized to price effects and how such effects should be addressed by the guidelines;
- the guidelines’ structural presumption that certain transactions are anticompetitive, whether current thresholds should be adjusted, and whether other metrics or qualitative factors should also trigger presumptions of competitive harm;
- the use of a market definition and, preliminarily, whether it is necessary to define the market in every instance, as well as how to define markets to better account for longer-term and non-price aspects of competition, like innovation loss, decreased quality and new barriers to entry;
- threats to potential and nascent competition, including ways to strengthen enforcement against transactions that eliminate potential competitors;
- monopsony power and labor market effects, including which aspects of employment should be considered in addition to wages, salaries and other financial compensation;
- digital markets, including whether the guidelines should analyze mergers in digital markets differently than those in other markets and how to address unique elements of these markets, like zero-price products, market power in multi-sided markets and mergers motivated by data aggregation;
- barriers to entry and growth, including whether there are factors impacting entry that the guidelines do not currently address; and
- the guidelines’ approach to efficiencies, including whether the cost savings arising from the elimination of redundant workers should be treated as cognizable efficiencies.
The RIF comment period ends on March 21, 2022, and comments may be submitted here. If the FTC and the DOJ determine that revisions to the merger guidelines are appropriate, they will publish proposed guidelines for another round of public comment. Jonathan Kanter, Assistant Attorney General for the Antitrust Division, has indicated that the agencies hope to finalize updated merger guidelines this year.
These reform efforts are consistent with the Biden Administration’s focus on promoting competition.[2] The RIF also tracks the FTC’s and the DOJ’s increased focus on non-price, non-quantitative aspects of competition, as well as concerns about adequately addressing anti-competitive forces in today’s economy that do not easily align with historical antitrust laws and frameworks.[3] The agencies’ questions regarding digital markets in particular, including whether the merger guidelines should adopt a different analysis with respect to mergers in these markets, are unsurprising given the heightened scrutiny by these agencies (as well as critics across the political spectrum) on large technology platforms like Facebook and Google. A departure from the more traditional aspects of competition and antitrust doctrine could ultimately lead to the review of more mergers and acquisitions, as well as closer scrutiny of large transactions, particularly those in the digital arena.
[1] This follows President Biden’s July 9, 2021 Executive Order on Promoting Competition in the American Economy (the “Executive Order”, available here), which encourages the Attorney General and the FTC Chair to review the horizontal and vertical merger guidelines and consider whether to revise them to address industry consolidation in the economy.
[2] See, e.g., Section 1 of the Executive Order, which “affirms that it is the policy of [the Biden] Administration to enforce the antitrust laws to combat the excessive concentration of industry, the abuses of market power, and the harmful effects of monopoly and monopsony….”
[3] Section 1 of the Executive Order also notes that “[i]t is also the policy of [the Biden] Administration to enforce the antitrust laws to meet the challenges posed by new industries and technologies, including the rise of the dominant Internet platforms, especially as they stem from serial mergers, the acquisition of nascent competitors, the aggregation of data, unfair competition in attention markets, the surveillance of users, and the presence of network effects.” See also Assistant Attorney General Jonathan Kanter Delivers Remarks on Modernizing Merger Guidelines, January 18, 2022, available here, and Statement of Chair Lina M. Khan Regarding the Request for Information on Merger Enforcement, January 18, 2022, available here.
