Tuesday, January 18th, the Federal Trade Commission (“FTC”) and the U.S. Justice Department’s Antitrust Division (“DOJ”) launched a joint public inquiry regarding the agencies’ horizontal and vertical merger guidelines. As part of this inquiry, the agencies are soliciting public comment via a Request for Information (“RFI”) on a wide range of topics that could lead to significant changes in the merger guidelines and increased scrutiny of a broad array of transactions. The agencies’ inquiry will address numerous themes of the merger guidelines including those highlighted below.

Review Includes Vertical and Horizontal Merger Guidelines

Chair Khan and Assistant Attorney General Kanter announced that the review will focus on whether the merger guidelines properly implement the statutory ban on transactions that “may” substantially lessen competition or tend to create a monopoly. The agencies will also consider whether there is a basis to distinguish between horizontal and vertical transactions in the modern economy. Specifically, Kanter noted that the current vertical merger guidelines “overstate the potential efficiencies of vertical mergers” and do not sufficiently consider theories of competitive harm. The agencies will focus on areas that the current guidelines “underemphasize or neglect” such as labor market effects and non-price competition like innovation, quality, potential competition, “or any trend toward concentration.” The agencies have also invited comments on mergers that have harmed competition.

Extensive RFI includes Inquiry into Presumptions, Unilateral and Coordinated Effects, Market Definition, Potential Competition, Innovation and IP, and Buyer Power

Currently, the merger guidelines identify certain types of transactions that carry a presumption of anticompetitive harm based on market concentration thresholds. The newly announced inquiry will test this presumption and whether to adjust the market concentration thresholds or supplement them with additional metrics or factors.

In addition, the agencies are seeking information regarding the types of evidence they should consider in assessing the effects of a merger; revisions to the assessment of possible coordinated and unilateral effects; tools used to define markets; changes in standards to strengthen enforcement involving potential and nascent competition; and whether the guidelines should use a different approach to market definition when considering innovation effects.

The inquiry will also review of how monopsony (buyer side) power should be assessed, including, specifically, monopsony power in labor markets. Chair Khan highlighted the impact of mergers on competition in labor markets as a focus area in order to address potential competitive harm to workers.

Focus on Digital Markets and “Special Characteristics” Markets

Notably, the inquiry addresses whether the agencies should analyze mergers involving digital markets and “special characteristics markets” differently than other markets. Chair Khan drew attention to “moat-building or data-aggregation strategies by digital platforms” as examples of business incentives that may facilitate acquisitions in digital markets. Similarly, Assistant Attorney General Kanter argued that the “complex interactions and business relationships” underlying consumers’ use of new technologies “present an opportunity to create or exploit market power.” With the agencies spotlighting the impact of digital transformations across a wide array of markets, this review of the merger guidelines could lead to an aggressive tightening of standards applied to proposed tech transactions, in particular.

In addition, the agencies will examine the guidelines approach to a number of markets with special characteristics including markets characterized by bargaining leverage, auctions, and clusters. The request also includes information on common ownership, consummated mergers, and acquisitions by private equity firms.

Public Comment Period

The agencies’ RFI provides for a 60-day public comment period. Parties may submit comments to regulations.gov until Monday, March 21, 2022. The RFI and page for comment submission can be found here.

Dissent within the FTC

FTC Commissioners Noah J. Phillips and Christine S. Wilson issued their own statement highlighting key divergences between the Democrat and Republican appointed members. Commissioners Phillips and Wilson agreed that the RFI should inquire into the notion of “digital markets”, acquiring nascent competitors, the impact on labor markets, and effects on incentives to innovate. They suggested, however, that the parties submitting responses to the agencies’ RFI address any assumptions that equate post-merger difficulties for rival firms with harm to competition and consumers or that consummated transactions fail to lead to cognizable efficiencies. Phillips and Wilson also noted that much of the legal authority cited by the agencies’ RFI “is nearly or more than half a century old,” stressing that any update to the merger guidelines should incorporate more recent precedents on antitrust law.

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Photo of Terrell McSweeny Terrell McSweeny

Terrell McSweeny, former Commissioner of the Federal Trade Commission (FTC), has held senior appointments in the White House, Department of Justice (DOJ), and the U.S. Senate. At the FTC and DOJ Antitrust Division, she played key roles on significant antitrust and consumer protection…

Terrell McSweeny, former Commissioner of the Federal Trade Commission (FTC), has held senior appointments in the White House, Department of Justice (DOJ), and the U.S. Senate. At the FTC and DOJ Antitrust Division, she played key roles on significant antitrust and consumer protection enforcement matters. She brings to bear deep experience with regulations governing mergers and non-criminal, anti-competitive conduct, as well as issues relating to cybersecurity and privacy facing high-tech, financial, health care, pharmaceutical, automotive, media, and other industries. Terrell is internationally recognized for her work at the intersection of law and policy with cutting edge technologies including Artificial intelligence (“AI”), Digital Health, Fintech, and the Internet of Things (“IoT”). Clients benefit considerably from her extensive relationships with other enforcement agencies around the world.

Prior to joining the Commission, Terrell served as Chief Counsel for Competition Policy and Intergovernmental Relations for the U.S. Department of Justice, Antitrust Division. She joined the Antitrust Division after serving as Deputy Assistant to the President and Domestic Policy Advisor to the Vice President from January 2009 until February 2012, advising President Obama and Vice President Biden on policy in a variety of areas.

Terrell’s government service also includes her work as Senator Joe Biden’s Deputy Chief of Staff and Policy Director in the U.S. Senate, where she managed domestic and economic policy development and legislative initiatives, and as Counsel on the Senate Judiciary Committee, where she worked on issues such as criminal justice, innovation, women’s rights, domestic violence, judicial nominations, immigration, and civil rights.

Photo of Jae Ermilus Jae Ermilus

Jae Ermilus is an associate in the firm’s Washington, DC office. She represents clients in a wide array of antitrust matters including litigation, transactional, and counseling matters. By example, she has counseled clients on pre-merger antitrust enforcement risks in addition to post-transaction compliance…

Jae Ermilus is an associate in the firm’s Washington, DC office. She represents clients in a wide array of antitrust matters including litigation, transactional, and counseling matters. By example, she has counseled clients on pre-merger antitrust enforcement risks in addition to post-transaction compliance issues.

Jae has also represented clients in investigations before the Department of Justice and Federal Trade Commission. This experience includes representing clients across multiple industries such as media, technology, retail, and pharmaceuticals.

Prior to returning to the firm, Jae clerked for the Honorable Denny Chin of the United States Court of Appeals for the Second Circuit.

Mathias Heller

Mathias Heller is an associate in the firm’s Washington, DC office. He is a member of the Election and Political Law Practice Group and the Antitrust/Competition Practice Group.