Feds Flex Their Flexibility In Revised Merger Guidelines
The U.S. Department of Justice and the Federal Trade Commission have released for public comment proposed revisions to the Horizontal Merger Guidelines that would reflect antitrust enforcers’ ever decreasing reliance on the bright-line tests that once dominated merger analysis.
The proposed revisions would continue the long term trend of antitrust authorities exercising more flexibility and discretion in analyzing individual mergers. The revised Guidelines signal a willingness by antitrust enforcers to be expansive in considering evidence of competitive effects, and a disinclination to rigidly apply traditional tests such as market definition.
Interested parties have until May 20, 2010, to provide comments on the proposed revised Guidelines.
The Guidelines, which were issued in 1992 and revised in 1997, outline the two agencies’ antitrust enforcement policy in reviewing horizontal mergers. The proposed revisions to the Guidelines are intended to reflect the agencies’ experience and their current approach to merger review. The revisions are also informed by a series of public workshops the two agencies have held
The proposed revised Guidelines include a new Section 2 on “Evidence of Adverse Competitive Effects,” which discusses types of evidence and sources of evidence the agencies will turn to in assessing the likely competitive effects of mergers. For instance, evidence of post-merger price increase or other changes adverse to customers is given substantial weight by the agencies – if these changes are anticompetitive effects resulting from the merger they can be dispositive for the agencies. A consummated merger can be anticompetitive even if price increases or other changes adverse to customers are not felt – the merged firm may be aware of the possibility of post-merger antitrust review and purposefully moderating its conduct.
The proposed Guidelines explain in Section 4 that market definition (which is traditionally used to assess the competitive impact of the merger) is not an end in and of itself – it is a tool to assess the effects of a merger. The agencies do not need to start their analysis with market definition. Some of the tools they use do not rely on market definition – even though the agencies’ analysis will necessarily include an evaluation of competitive alternatives available.
The proposed Guidelines also:
• Update market concentration levels indicative of a highly concentrated market in Section 5;
• Discuss how the agencies evaluate unilateral effects resulting from the elimination of competition between two firms in Section 6;
• Discuss how agencies evaluate coordinated effects – including whether the merger affects the ability of multiple firms in the market to raise their prices and whether there is evidence that a market is vulnerable to coordinated conduct in Section 7; and
• Provide more guidance on when entry by other firms is considered timely, likely and sufficient to counteract the anti-competitive effects of the merger in Section 9.