On July 19, 2023, the Federal Trade Commission (“FTC”) and United States Department of Justice (“DOJ”) jointly published long-anticipated proposed merger guidelines (the “Proposed Merger Guidelines”), which had been expected since President Biden issued an Executive Order Promoting Competition in the American Economy in the summer of 2021. According to the agencies, the Proposed Merger Guidelines “build upon, expand, and clarify” the prior guidance, to keep up with “modern” market realities. In contrast to the previous versions, the Proposed Merger Guidelines cover both horizontal and vertical mergers. They also cite case law for the first time. Reflecting the Biden Administration’s views on federal antitrust merger enforcement, the Proposed Merger Guidelines substantially expand the types of competitive harm the agencies consider grounds for challenging a transaction under Section 7 of the Clayton Act (which prohibits mergers where the effect is “substantially to lessen competition” or “to tend to create a monopoly”).
Public comment on the Proposed Merger Guidelines is open until at least September 18, 2023. Even if adopted, they will not have the force or effect of law and likely will be subject to litigation and judicial interpretation. The FTC Commissioners voted 3-0 to approve the Proposed Merger Guidelines, and the DOJ is fully aligned.
Accompanying the announcement, two of the three FTC Commissioners wrote separate statements (each joined by the others) to highlight different elements of the Proposed Merger Guidelines, providing insight into what they view as most important.
Commissioner Rebecca Kelly Slaughter praised them for combining vertical and horizontal guidance, recognizing that “few transactions in today’s economy are purely horizontal or vertical,” and noting, “some include components of both,” or have dimensions that defy categorization. Commissioner Slaughter also touted the explicit recognition of the Clayton Act’s plain language prohibiting mergers which “tend to create a monopoly,” which, she argued, the previous guidelines failed to give “appropriate weight.”
Commissioner Alvaro M. Bedoya dedicated his five-page statement to the importance of considering competition in labor markets. Commissioner Bedoya’s statement detailed four ways the Proposed Merger Guidelines recognize the importance of labor competition, including that a proposed transaction “cannot be saved by purported benefits to product markets” if it “substantially lessen[s] competition in a labor market.” While consistent with the 2021 Executive Order and recent DOJ and FTC policies and proposed rules, this proposed guideline introduces a groundbreaking change to merger review considerations. It is notable, too, that Commissioner Bedoya chose to use the effects of hospital mergers on nurses to illustrate his point. The healthcare industry has consistently been a major target of antitrust enforcement actions focusing on labor competition.
Because their views profoundly impact the merger review process and selection of deals for challenge, understanding each individual FTC Commissioner’s priorities, as articulated in the Proposed Merger Guidelines, will be critical for businesses and their counsel when assessing the antitrust risks of mergers and acquisitions going forward.
The Proposed Merger Guidelines comprise thirteen “overview” guidelines, which provide criteria the agencies may consider when reviewing transactions under the Clayton Act, followed by discussion of the details, tools to define relevant markets, and an explanation of how the agencies would approach common rebuttal evidence. Below is a brief summary of the Proposed Merger Guidelines, broken down into three categories: (1) what is new since the previous versions in 2010 and 2020; (2) what expands on the prior guidelines; and (3) what remains essentially unchanged.
A lot! The Proposed Merger Guidelines include a number of criteria that represent a significant departure from decades of federal antitrust merger enforcement and leave ample of room for interpretation and future legal challenges:
- Guideline 5: Mergers should not substantially lessen competition by creating a firm that controls products or services that its rivals may use to compete.
- Guideline 7: Mergers should not entrench or extend a dominant position.
- Guideline 8: Mergers should not further a trend toward concentration.
- Guideline 9: When a merger is part of a series of multiple acquisitions, the agencies may examine the whole series.
- Guideline 10: When a merger involves a multi-sided platform, the agencies examine competition between platforms, on a platform, or to displace a platform.
- Guideline 11: When a merger involves competing buyers, the agencies examine whether it may substantially lessen competition for workers or other sellers.
What’s Been Expanded?
The Proposed Merger Guidelines expand the 2010 Horizontal and 2020 Vertical Merger Guidelines analysis of potential competition. Specifically:
- Guideline 1: Mergers should not significantly increase concentration in highly concentrated markets.
While the previous merger guidelines contain similar language, the Proposed Merger Guidelines introduce a market share threshold of 30%, above which a transaction will be presumed to violate Section 7 of the Clayton Act without regard to overall market concentration if the transaction effects a substantial change to the relevant market’s concentration.
- Guideline 4: Mergers should not eliminate a potential entrant in a concentrated market.
The 2010 Guidelines referred to analysis of projected market shares, but the Proposed Merger Guidelines simplify the analysis to say just that elimination of potential entrants is prohibited. This section also highlights the agencies’ policy view that the antitrust laws have a “preference for internal grow[th] over acquisition,” telling agency reviewers to consider whether one or more of the firms at issue would have a “reasonable probability of entering the relevant market” on its own, including whether the firm(s) had the capability or could have acquired the capability to do so, even absent any intent to do so.
- Guideline 6: Vertical mergers should not create market structures that foreclose competition.
This is similar to the 2020 Vertical Merger Guidelines, but the Proposed Merger Guidelines introduce the concept that a “foreclosure share” over 50 percent, standing alone, is enough for the agencies to presume the vertical merger has the effect of substantially lessening competition. The Proposed Merger Guidelines also appear to simplify and streamline the factors the agencies will consider when the foreclosure share is below 50%.
What Hasn’t Changed?
These guidelines existed in the 2010 and 2020 versions and remain largely unchanged:
- Guideline 2: Mergers should not eliminate substantial competition between firms.
- Guideline 3: Mergers should not increase the risk of coordination.
- Guideline 12: When an acquisition involves partial ownership or minority interests, the agencies examine its impact on competition.
- Guideline 13: Mergers should not otherwise substantially lessen competition or tend to create a monopoly.
These reflect broad concepts for antitrust enforcement, which are more foundational in nature, so it makes sense that changing dynamics in markets would not affect them.
As we spend more time with the Proposed Merger Guidelines, we will follow up with additional analysis. In the meantime, public comment is open here until at least September 18.
 Last updated in 2010 for horizontal mergers and 2020 for vertical mergers.
 While the Proposed Merger Guidelines cite a handful of recent cases, the majority are from the 1960s and 1970s.
 Currently only the Commissioners from the Democratic Party are serving, with two Republican Commissioners to begin serving later this year, pending confirmation by the Senate.
 Consider DOJ Antitrust Division’s recent emphasis on no-poach and wage-fixing cases (e.g., here), the FTC’s January 2023 proposed rulemaking to ban non-compete clauses (e.g., here), and the FTC and DOJ’s notice of proposed rulemaking regarding premerger notification, which would require merging parties to provide the agencies with information to assess the transaction’s effect on labor markets (e.g., here).
 Four of the five criminal no-poach/wage-fixing cases brought by the DOJ Antitrust Division since 2020 have involved health care companies and workers.
 The Proposed Merger Guidelines define “foreclosure share” as the “share of the related market that is controlled by the merged firm, such that it could foreclose rival’s access to the related product on competitive terms.”
 While Commissioner Slaughter stated the prior guidelines did not give sufficient weight to the latter prong of Section 7 of the Clayton Act, we do not consider this guideline to reflect a significant change because it simply incorporates the plain language of the statute, which the Proposed Merger Guidelines interpret.