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Crowell & Moring Co-Hosts Conference Highlighting Issues DOJ and FTC Will Focus on Revised Merger Guidelines

December 17, 2021

On December 1, 2021, Crowell & Moring and The George Washington University Competition Law Center co-hosted our third annual Antitrust & Tech Conference. This year’s (virtual) conference focused on the factors motivating a re-evaluation of approaches to merger enforcement, and revisions to the U.S. merger guidelines that may be considered by the agencies. During two panel discussions followed by a fireside chat, thought leaders representing diverse perspectives from academia, industry, and antitrust think tanks discussed the issues facing enforcers and legislators as they assess concerns about the state of merger enforcement and what companies across all industries should expect regarding proposed reforms. We have provided a short summary of each session below. A video recording of the panel discussions and fireside chat is available here (please register first to gain access to the video recordings).

  1. Panel 1:  What Prompted the Focus on Revising the Merger Guidelines
  2. The first panel discussion set the stage by identifying factors that prompted the current critique of U.S. merger enforcement. Moderated by Shawn Johnson, Andy Gavil, and Bill Kovacic, it included Robert Mahini (Senior Competition Counsel, Google), Diana Moss (President, American Antitrust Institute), and former FTC Commissioner Josh Wright (Executive Director of the Global Antitrust Institute; Professor, Department of Economics, George Mason Antonin Scalia Law School).

    Proponents of more aggressive merger enforcement cited several factors in support. One is data that purports to show increasing concentration and reduced consumer choice across numerous sectors in the U.S. economy. Other factors, based on academic papers and other sources, included concerns that merger enforcement today is hampered by overly demanding standards of proof for government enforcers, poorly-reasoned court decisions (e.g., Sprint/T-Mobile), failed remedies (e.g., Safeway/Albertsons), the failure of merged firms to achieve proffered efficiencies, and mistaken approaches to the analysis of two-sided markets (e.g., Sabre/Farelogix).

    Advocates for the continuation of the current enforcement approach (and against radical changes) pointed to countervailing factors. One such factor is that the concentration data frequently used in reports and articles does not accurately reflect the competitive conditions in actual antitrust markets. Rather, they pointed to data indicating that local markets have become less concentrated over time. It was also argued that increased margins are due not to the exercise of market power, but to diminishing marginal costs, which should be lauded.

    Additionally, those opposed to radical revision of antitrust law noted that the government still wins a high percentage of merger cases, indicating that the courts are not particularly hostile to challenges and are applying appropriate legal standards and presumptions. It was further suggested that, even if a degree of stepped-up enforcement is warranted, the evidence does not justify a radical departure from the current approach to merger analysis which could result in harm, not benefit, to competition and consumers. Another suggestion was that the focus on the tech sector is misplaced because it continues to evidence vigorous competition, including ongoing innovation and new entry.

  3. Panel 2:  Issues for Consideration in New Merger Guidelines
  4. The second panel discussion focused on the prospects and options for reforming the Vertical and Horizontal Merger Guidelines. Moderated by Jeane Thomas, Andy Gavil, and Bill Kovacic, the panel included Sandeep Vaheesan (Legal Director, Open Markets Institute), Steve Salop (Professor of Economics and Law, Georgetown; Senior Associate, Charles River Associates), and Elizabeth Bailey (Lecturer at the The Wharton School at the University of Pennsylvania; Vice President, Charles River Associates).

    Proponents of more aggressive reform pointed to the precedent from older Supreme Court cases, including Brown Shoe, Von’s Grocery, and Philadelphia National Bank, which have never been overruled and which they believe more faithfully reflect the Congressional intent in passing the 1950 amendments to the Clayton Act. Those cases emphasized the use of structural presumptions, including ones based on four-firm concentration ratios and combined market shares. They would also allow presumptions to be triggered at what would be relatively low thresholds by contemporary standards to halt further industry concentration in its incipiency, which is viewed as suspect for reasons beyond competition alone. And the older cases de-emphasize, if not eliminate, the effects-based approach associated with the consumer welfare model, which many critics of the current regime argue is difficult to reconcile with the Clayton Act’s incipiency standard. Perhaps most aggressive was the suggestion that new Guidelines eliminate any efficiency “defense” or competitive effects analysis, leaving the failing firm defense as the only way to overcome the structural presumption. The touchstone for this analytical approach is the 1968 Merger Guidelines, which can be found here.

    Other panelists, however, advocated for a more modest approach to revisions of the Guidelines. For example, one view expressed is that the current Guidelines were not designed for the characteristics of technology markets. Instead, they work well with markets characterized by static competition, relying on metrics like market shares, HHIs, GUPPIs, etc. These types of metrics, it was argued, can be less effective at predicting competitive effects overtime in dynamic markets. 

    Others on the panel expressed concerns about a return to heavy reliance on structural presumptions to the exclusion of other measures of competitive effects, and abandonment of the basic tenets of the consumer welfare model and its economic grounding. They argued that bright-line tests can be more of a brute force approach that would miss important factual context. They also noted that this approach would put more emphasis on the imprecise science of market definition, and likely lead to overenforcement and over-deterrence of desirable mergers. The better approach, they argued, would be to use rebuttable presumptions that help the agencies prove a prima facie case but still leave room for considering the factual context of each industry.

  5. Fireside Chat with Professors Shapiro and Farrell
  6. The final segment was a fireside chat led by Andy Gavil and Bill Kovacic with two of the principal drafters of the current (2010) Horizontal Merger Guidelines:  former Director of the FTC Bureau of Economics Joseph Farrell (Professor, Department of Economics at the University of California at Berkeley; Partner, Bates White Economic Consulting) and former DOJ Economic DAAG Carl Shapiro (Professor Emeritus, Haas School of Business and Department of Economics at the University of California Berkeley; Senior Consultant, Charles River Associates). They reflected on the prior two panel discussions and provided insights on how their work leading the drafting of the 2010 Guidelines might inform the next round of Guideline revisions.

    The two former chief economists, while expressing support for increased merger enforcement and updating the Guidelines in certain respects, also emphasized their view that any revision should be based on economic principles and learning, which continue to evolve. There was concern expressed that arguments about huge increases in corporate concentration as the cause of economic inequality and slow growth are not supported by solid empirical evidence and that radical revisions to national merger policies based on flawed assumptions could be harmful to the economy.

    When asked which provisions of the current Guidelines should be retained and which should be examined for potential revisions, the panelists focused on several factors. Among the points worth preserving, the speakers suggested, were increased transparency and clarity for judges and the business community, an explanation of how economic evidence is used to analyze competitive effects, and specificity regarding market definition tools.

    Regarding efficiencies, it was suggested that they should continue to be considered but perhaps with more skepticism than they have been in the past. Also noted was the suggestion for further explication of coordinated effects, which have been difficult for the agencies to prove absent direct evidence of prior coordination.

    It was also suggested that the Guidelines might be updated with respect to monopsony effects, including those in labor markets, and the role of innovation in competitive analysis. The speakers concluded by encouraging more empirical merger analysis, including retrospectives, and continuing focus on the economic effects of proposed mergers.

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Alexis J. Gilman
Partner – Washington, D.C.
Phone: +1.202.624.2570
Shawn R. Johnson
Partner – Washington, D.C.
Phone: +1.202.624.2624
Jeane A. Thomas, CIPP/E
Partner – Brussels, Washington, D.C.
Phone: +, +1.202.624.2877
Andrew I. Gavil
Senior Of Counsel – Washington, D.C.
Phone: +1.202.628.2823
Kate M. Watkins
Counsel – Washington, D.C.
Phone: +1.202.624.2744
Aryeh Mellman
Associate – Washington, D.C.
Phone: +1.202.624.2706