FTC and DOJ issue new merger guidelines

Photo: John Fedele/Getty Images

The Federal Trade Commission and the Justice Department have jointly issued new 2023 Merger Guidelines, which guide the agencies when reviewing mergers and acquisitions in healthcare and other industries. 

The 51-page document contains 11 guidelines. 

The FTC has cited market concentration and its effect on competition in challenging potential health system consolidation.

• Guideline 1: Mergers raise a presumption of illegality when they significantly increase concentration in a highly concentrated market.

The FTC and DOJ said they presume, unless sufficiently disproved or rebutted, that a merger between competitors that significantly increases concentration and creates or further consolidates a highly concentrated market may substantially lessen competition. 

• Guideline 2: Mergers can violate the law when they eliminate substantial competition between firms.
• Guideline 3: Mergers can violate the law when they increase the risk of competition. 
• Guideline 4: Mergers can violate the law when they eliminate a potential entrant in a concentrated market. 
• Guideline 5: Mergers can violate the law when they create a firm that may limit access to products or services that rivals use to compete.
• Guideline 6: Mergers can violate the law when they entrench or extend a dominant position. 

The agencies said they apply the framework in Guidelines 1-6 when considering the following Guidelines 7-11.

•  Guideline 7: When an industry undergoes a trend toward consolidation, the agencies consider whether it increases the risk a merger may substantially lessen competition or tend to create a monopoly. 
• Guideline 8: When a merger is part of a series of multiple acquisitions, the agencies may examine the whole series. 
• Guideline 9: When a merger involves a multi-sided platform, the agencies examine competition between platforms, on a platform or to displace a platform.
• Guideline 10: When a merger involves competing buyers, the agencies examine whether it may substantially lessen competition for workers, creators, suppliers or other providers.
• Guideline 11: When an acquisition involves partial ownership or minority interests, the agencies examine its impact on competition. 

WHY THIS MATTERS

The new guidelines, released on Monday, replace guidelines released in July, based on comments from the public. 

The 2023 Merger Guidelines are not themselves legally binding, but provide transparency into the agencies' decision-making process, they said.

The FTC and DOJ have challenged numerous healthcare mergers citing anticompetitive concerns when health systems have attempted to consolidate or when insurers have proposed horizontal mergers, such as in 2017 when Anthem, now Elevance Health, attempted to buy Cigna for $54 billion.

More recently, the FTC and the state of California moved to dismiss their case challenging John Muir Health's proposed deal to acquire sole ownership of San Ramon Regional Medical Center from current majority owner Tenet Healthcare Corporation, following an announcement of the deal's termination.

Bureau of Competition Director Henry Liu said by statement: "The FTC has scored another major healthcare win in less than a month, delivering patients in California continued access to quality, affordable healthcare services. John Muir's anticompetitive hospital takeover would have driven up healthcare costs for critical services like heart surgery, spinal surgery, and maternity care. It also threatened to eliminate improvements in care driven by competition, which directly benefit patients."

THE LARGER TREND

The Commission voted 3-0 to approve the 2023 Merger Guidelines.

The 2023 Merger Guidelines are the culmination of a nearly two-year process of public engagement and reflect modern market realities, advances in economics and law, and the lived experiences of a diverse array of market participants, the agencies said.

The agencies announced an initiative to evaluate possible revisions to the 2010 Horizontal Merger Guidelines and the 2020 Vertical Merger Guidelines and published a Request for Information on Merger Enforcement, which sought public comment on modernizing merger enforcement. 

The agencies drafted and jointly released a proposed version of the 2023 Merger Guidelines for public comment in July and received more than 30,000 comments.

Commenters highlighted excessive market consolidation across industries and overwhelmingly urged the agencies to strengthen their approach to merger enforcement, they said. 

More comments were received from the public, attorneys, economists, academics, enforcers and other policymakers at three Merger Guidelines Workshops. 

The agencies have issued merger guidelines since 1968. 

ON THE RECORD

"Fair, open, competitive markets have been essential to America's dynamic, thriving economy, and policing unlawful mergers is our front line of defense against harmful corporate consolidation," said FTC Chair Lina M. Khan. "The 2023 Merger Guidelines reflect the new realities of how firms do business in the modern economy and ensure fidelity to statutory text and precedent. I am grateful for the thousands of comments submitted by American workers, consumers, entrepreneurs, farmers, business owners, and other members of the public. This input directly informed the guidelines and allowed us to pursue this work with a deeper understanding of the real-life stakes of merger enforcement."

"These finalized guidelines provide transparency into how the Justice Department is protecting the American people from the ways in which unlawful, anticompetitive practices manifest themselves in our modern economy," said Attorney General Merrick B. Garland. "Since releasing the Draft Merger Guidelines earlier this summer, we have engaged with stakeholders across the country, and the Guidelines are stronger as a result. The Justice Department will continue to vigorously enforce the laws that safeguard competition and protect all Americans."

Twitter: @SusanJMorse
Email the writer: SMorse@himss.org