FTC and DOJ Propose a Merger Standards Update to Address Modern Market Realities

In response to the changing landscape of the modern economy, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) have presented a proposed update to their merger guidelines for public comment. The effort to revamp the guidelines began in early 2022, when the agencies launched a joint public inquiry into managing the surge in merger filings and growing market concentration across multiple industries.

The proposed Merger Guidelines, the third update in the 21st century, aim to reflect the current realities of business operations and competition. FTC Chair Lina Khan stated that the draft guidelines were developed with the input of various stakeholders, including healthcare workers, farmers, patient advocates, musicians, and entrepreneurs, gathering over 5,000 public comments. These guidelines not only update existing standards but also ensure compliance with Congress' mandate and legal precedents.

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One notable aspect of the proposal is the inclusion of a breakdown of platform acquisition factors, marking a competitive divergence from traditional 20th-century market arrangements. The authorities emphasize their focus on assessing mergers that may reduce buyer competition, including labor service purchasers.

The draft also introduces a tightened market concentration threshold, setting out the criteria for rejecting merger deals. The agencies want to review deals with a post-merger Herfindahl-Hirschman Index (HHI) of 1,800 or a significant increase in concentration, which is shown by a change in HHI of more than 200 or other factors that may speed up concentration.

The proposed Merger Guidelines consist of 13 factors that will be employed to determine whether a merger deal violates antitrust laws. Phrases such as "Mergers should not increase the risk of coordination" and "Mergers should not entrench or extend a dominant position" outline the key principles guiding the evaluation process.

The FTC and DOJ will welcome public comments on the draft Merger Guidelines for 60 days until September 18, encouraging feedback from various stakeholders. This proposed update marks a crucial step in adapting antitrust regulations to suit the complexities of the modern economy. DOJ Antitrust Division Assistant Attorney General Jonathan Kanter emphasized that competition in today's market differs significantly from that of the past few decades and must be protected accordingly.

The regulators' focus on addressing economy-wide deal-making comes after President Joe Biden's executive order in 2021, urging agencies to review merger proposals, particularly in the healthcare sector. Since then, regulators have been actively challenging anticompetitive healthcare and pharmaceutical transactions in court. However, this push for greater scrutiny has also met with resistance, as some industry groups argue that it may hamper economic growth.

In addition to the proposed Merger Guidelines, the FTC has suggested new pre-merger notice rules that would require merging companies to provide more information to the regulator about their potential deals. While these initiatives aim to promote fair competition and prevent market consolidation, they also warrant thorough evaluation to ensure their efficacy and potential impact on the business environment.

In conclusion, the FTC and the DOJ's proposed merger standards update seeks to address the evolving realities of the modern economy. By inviting public comments and considering various stakeholder perspectives, the agencies aim to foster transparency and effective competition protections. As the regulatory landscape evolves, it remains crucial to strike a balance between promoting fair competition and enabling economic growth and innovation.