Dear Readers,
The U.S. Justice Department first published merger guidelines in 1968, with the goal of providing transparency to the standards applied in reviewing mergers. Since then, the agencies have updated the guidelines numerous times.
In early 2022, the FTC and the antitrust division of the DOJ launched a new review into the guidelines, with a view to taking into account “developments in the modern economy and new evidence of mergers’ effects on competition.” As this might suggest, the revised guidelines (when adopted) may signal a more interventionist stance from the agencies. Indeed, recent statements by the agency heads suggest that new merger guidelines may replace the tried-and-tested consumer welfare standard with a series of alternate goals, reflecting the so-called “neo-Brandeisian” school of antitrust.
The pieces in this volume address the potential revisions to the merger guidelines, with each author taking a distinctive stance on the issues – some cautious and others more welcoming of change.
Maureen K. Ohlhausen & Taylor Owings open with the blunt assessment that such neo-Brandeisian policies would chill acquisitions and potentially remove from the competitive race the companies that often have the best prospects for de-consolidating many markets, including digital markets that are prone to tipping.
Mark Israel, Jonathan Orszag & Jeremy Sandford also comment on this possible policy shity. Proponents of the shift see a need to promote goals other than consumer welfare and believe the consumer welfare standard is inadequate to enforce against mergers resulting in certain types of harms. The authors, however, disagree: in their view, shifting away from the consumer welfare standard would necessarily harm consumers and replace a clear standard with a series of vague standards, undermining the agencies’ credibility, which would also harm consumers.
Daniel Francis poses the question in magical terms: What should we do with a magic wand? The revision of the merger guidelines offers an opportunity to update and improve the foundational texts of U.S. merger control, but it also poses dangers. The author posits that is not at all clear that the text of the 2010 guidelines is really holding back federal merger enforcement: all seem to be much more significant constraints on the agencies. That said, including brief discussions of future (including potential and nascent) competition, platform markets, data, and the relationship between merger review and conduct would help the public, courts, policy-makers, and merging parties understand the stakes.
Keith Klovers, Alexandra Keck & Allison Simkins underline the need for new guidelines that are consistent both internally and with binding precedent. Indeed, because the “essence of the rule of law is that like cases are treated alike,” it is doubtful that inconsistent guidelines could win judicial adoption. But there is a risk that the new guidelines will adopt inconsistent positions on several topics. For example, recent discussions of “nascent competition” suggest the agencies might formally adopt a lenient test for assessing the competitive significance of entrants deemed “nascent competitors,” but a more stringent test for assessing the competitive significance of any other potential entrants.
Mark A. Jamison has a focused point: he argues that merger analysis should move away from observations based on past markets towards focusing on industry features that do or that will create market power – i.e. protect firms from competitive pressure – and then adopt policies that challenge mergers that would extend the reach of such monopoly-inducing features.
Abbott B. Lipsky, Jr. focuses on vertical mergers. In a major policy switch, the agencies recently announced increased hostility to vertical mergers. Stated reasons include skepticism of their benefits and of remedies traditionally used to control their competitive risks. Based on the long enforcement history involving vertical mergers, the agencies’ concerns are materially overstated. Since February 2022, agency litigation threats led to voluntary termination of several deals, but the agencies lost both of the other cases that were tried. The author suggests that the agencies should consider the lessons of their recent defeats.
Margaret C. Levenstein & Valerie Y. Suslow similarly focus on vertical relationships, specifically vertical relationships that can have coordinated effects. These relationships can have important implications for planned revisions of the U.S. Department of Justice merger guidelines. Vertical mergers can expand the scope for monitoring, coordination, punishment, and exclusion on the part of horizontally colluding firms. The very high horizontal concentration levels observed in markets with explicit collusion also suggests that the merger guidelines should address such patterns of market dominance.
Malcolm B. Coate focuses on one potential change, the elimination or marginalization of price modeling in merger analysis. Recognized as useful in the 2010 Guidelines, these models have been applied, with mixed results in a number of recent litigations. The author analyzes the foundational models of price modeling in order to bring important insights. In his view, returning unilateral effects analysis to its historical focus on the totality of the evidence is a good idea.
Whatever the outcome of the agencies’ current consultation, it seems that U.S. merger policy is at something of a crossroads (as is antitrust more broadly). The pieces in this volume draw together the threads of the various possible reforms in order to develop a roadmap of how merger review in the U.S. will look beyond 2022. No matter what path the agencies choose to take, the route ahead will prove interesting.
As always, many thanks to our great panel of authors.
Sincerely,
CPI Team[1]
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[1] CPI thanks ITIF for their sponsorship of this issue of the Antitrust Chronicle. Sponsoring an issue of the Chronicle entails the suggestion of a specific topic or theme for discussion in a given publication. CPI determines whether the suggestion merits a dedicated conversation, as is the case with the current issue of the Chronicle. As always, CPI takes steps to ensure that the viewpoints relevant to a balanced debate are invited to participate and that the quality of our content maintains our high standards.
