Draft merger guidelines will influence how DOJ and FTC conduct reviews
Court case precedent and reinstatement of former market concentration thresholds will play a major role.
Photo: skynesher/Getty Images
The U.S. Department of Justice and the Federal Trade Commission have released draft guidelines that tighten the review of mergers and acquisitions.
While the guidelines determine a merger's effect on competition in industries ranging from food and agriculture to healthcare, they are expected to impact the latter as health system M&A has climbed back to pre-pandemic levels.
The agencies are seeking public comment through September 18.
WHY THIS MATTERS: WHAT'S CHANGING
One major change is the restoration of practices on market concentration thresholds.
The first merger guidelines to reference a threshold based on a market concentration index were issued in 1982. Courts routinely cited these concentration thresholds, the DOJ said, but in practice the agencies tended to challenge mergers that greatly exceeded these thresholds to focus their limited resources on the most problematic transactions.
The 2010 Horizontal Merger Guidelines adopted more permissive thresholds based on this agency practice. The new draft guidelines restore the Herfindahl-Hirschman Index (HHI) threshold that existed prior to 2010 to better reflect both the law and the risks of competitive harm, the DOJ said.
The draft guidelines also recognize the growing importance of platform competition. Platform markets present distinct competitive considerations from previous traditional market structures, as they often present high entry barriers, and are likely to tip in ways that entrench dominant firms, the DOJ said.
The draft guidelines describe the distinctive characteristics and considerations that arise when platforms are part of an acquisition.
The new guidelines are the first to cite court case precedents. The document draws extensively on Supreme Court and appellate cases.
The draft guidelines eliminate the previous separate treatment of horizontal and vertical transactions in favor of a unified approach.
Importantly, unlike the prior Vertical Merger Guidelines that were issued during the Trump administration, and withdrawn during the Biden administration, the draft guidelines do not entertain the notion that vertical transactions are inherently less problematic than horizontal mergers, according to law firm Davis Polk.
THE LARGER TREND
Since 1968, the DOJ and FTC have issued and revised merger guidelines several times, including in 1982, 1984, 1992, 1997, 2010 and 2020.
In January 2022, the agencies announced a broad initiative to evaluate potential updates and revisions to the Horizontal Merger Guidelines, issued in 2010, and the Vertical Merger Guidelines issued in 2020.
ON THE RECORD
"Unchecked consolidation threatens the free and fair markets upon which our economy is based," said Attorney General Merrick B. Garland. "These updated Merger Guidelines respond to modern market realities and will enable the Justice Department to transparently and effectively protect the American people from the damage that anticompetitive mergers cause."
"As markets and commercial realities change, it is vital that we adapt our law enforcement tools to keep pace so that we can protect competition in a manner that reflects the intricacies of our modern economy. Simply put, competition today looks different than it did 50 – or even 15 – years ago," said Assistant Attorney General Jonathan Kanter of the Antitrust Division. "There will be a substantial process for the public to review and provide comments before we finalize these guidelines."
Twitter: @SusanJMorse
Email the writer: SMorse@himss.org
