Merger Enforcement is Picking Up as DOJ and FTC Solicit Comments on Updating Merger Review Guidelines – Start Sharpening Your Pencils.
Anyone interested in the current antitrust revival will have an opportunity to voice his or her views as to how to improve antitrust enforcement aimed at anticompetitive mergers.
Even non-attorneys are likely to have noticed the increased focus on antitrust enforcement in the United States targeting mergers through government reviews and litigated challenges. From books to computing technology, from beer to airlines, from life sciences to social networking services, from cheese to banking, from sugar to talent agency services, no industry seem to be spared from these increased enforcement efforts. In response, some merging parties have chosen to cancel their mergers (e.g., Visa-Plaid, Aon-Willis Towers), others have agreed to divestitures, and some are fighting on.
On parallel tracks, legislative changes are also proceeding at federal and state levels. Not only are several antitrust reforms being considered in Congress (new fees), but and New York State is considering a major antitrust overhaul that would implement a new premerger review program and an abuse of dominance standard that may bring New York law closer to Europe. In the past year, federal enforcement agencies have also made policy changes: the Federal Trade Commission (“FTC”) voted to revoke its vertical merger guidelines and restored its prior approval policy (requiring companies that settle with the FTC to get the agency’s blessing to close any further acquisitions in affected markets for at least the next 10 years).
The federal government is now seeking public comments on updating merger enforcement. The FTC and the Justice Department’s Antitrust Division (“DOJ”) have announced a joint public inquiry soliciting input by March 21, 2022, on ways to improve and modernize the federal merger guidelines “to better detect and prevent illegal, anticompetitive deals in today’s modern markets.” The FTC and DOJ are charged to block mergers that may substantially lessen competition or tend to create a monopoly. Their merger guidelines frame their analysis of transactions and serve to give enforcement guidance to the business and legal community. After receipt of the comments, the agencies may revise their guidelines later this year. If they do, the revised guidelines would be published for comment as well.
The agencies are seeking input from market participants, government entities, economists, attorneys, academics, unions, employees, farmers, workers, businesses, franchisees, and consumers. This request for input follows other calls for input on revising merger guidelines in specific sectors such as banking and pharma.
DOJ and FTC are specifically interested in feedback on the following areas: (1) the purpose and scope of merger review, including “whether distinctions between horizontal and vertical transactions reflected in the guidelines should be revisited in light of trends in the modern economy”; (2) the thresholds for the presumptions that certain transactions are anticompetitive; (3) the use of market definition in analyzing anti-competitive effects; (4) threats to potential or nascent competitors; (5) the impact of monopsony power, including on labor markets; and (5) the unique characteristics of mergers in digital markets.
The FTC, DOJ and state attorneys general have authority to challenge mergers under, among others, Section 7 of the Clayton Act, which states, in relevant part, that “[n]o person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock . . . where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” 15 U.S.C. § 18 (emphasis added). In other words, a violation of Section 7 occurs if (1) one company acquires a stake, often even a minority stake of another company’s outstanding stock, and (2) the acquisition “may . . . substantially . . . lessen competition or tend to create a monopoly.”
Private parties, such as competitors, customers, or suppliers of merging parties, can also challenge mergers under the Clayton Act and obtain remedies. Even if a third party does not challenge the merger, it may still be called to voice its views as increased enforcement inevitably leads to competitors, customers and suppliers being subpoenaed or called as witnesses in litigated merger challenges.
In response to the call for input, many stakeholders will likely be commenting on revisions to the merger guidelines.
Edited by Gary J. Malone