FTC and DOJ Issue Final Version of Revised Merger Guidelines
On August 19, 2010, the FTC and DOJ jointly issued the final version of the revised Horizontal Merger Guidelines, marking the end of a revision process initiated in September 2009. Following a series of workshops and dozens of public comments, the agencies issued draft revised guidelines in April 2010, which drew further comments from the public. The latest round of public comments and agency review prompted minor revisions to the April 2010 draft guidelines, noted below.
The revised Guidelines describe a more flexible, fact-specific inquiry, as opposed to the more structured methodology outlined in the prior 1992 Guidelines. The new Guidelines incorporate four major changes from the 1992 version:
Reduced Emphasis on Market Definition. The revised Guidelines make clear that merger review “need not start with market definition.” While the principles of market definition are preserved, the revised Guidelines now explicitly allow for the assessment of a transaction’s competitive effects without first defining the relevant market. This represents a fundamental shift from the structured approach provided under the 1992 Guidelines and significantly de-emphasizes the role of market definition. The latest revision to the opening of the Market Definition section, however, (Section 4) at least acknowledges that § 7 of the Clayton Act specifies that the competitive effects of mergers must be tested in a “line of commerce” and “section of the country,” and that the agencies will “normally identify one or more relevant markets” when challenging a merger.
Increased Emphasis on Preventing Harm to Sub-Groups of Customers. The revised Guidelines in several places emphasize the agencies’ concern with the effect of mergers on identified customer groups, even if other customers in the relevant market will not be harmed. This is reflected in the discussion of Targeted Customers and Price Discrimination (Section 3) and Product Market Definition with Targeted Customers (Section 4.1.4), for example, as well in the discussion of Pricing of Differentiated Products (Section 6.1), and Powerful Buyers (Section 8). These changes signal an increased interest in challenging proposed transactions that may impact particular subgroups within a relevant market.
Sources of Evidence Regarding Competitive Effects. For the first time, the revised Guidelines incorporate a new section outlining the types of evidence relevant to competitive effects. These include concentration in the market and whether the merging parties are direct competitors. The agencies will also consider, however, effects observed in other consummated mergers and natural experiments, as well as the existence of a maverick firm. While this simply describes existing agency practice, the new section heightens the importance of this evidence and emphasizes the fact-specific nature of this inquiry.
The revised Guidelines retain the discussion of “upward pricing pressure,” (Section 6.1), notwithstanding the rejection of that test by the first court to consider it. The City of New York v. Group Health Inc., 2010 U.S. Dist. LEXIS 60196, *17-*18 (S.D.N.Y. May 11, 2010).
Higher Concentration Thresholds. The revised Guidelines also explain in more detail the role of market concentration measures and revise the concentration thresholds likely to trigger additional review. These revisions similarly update the Guidelines to more accurately reflect actual agency practice.
Whether the revised Guidelines in fact accomplish their stated goal to better reflect actual agency practice remains to be seen. Commissioner Rosch’s separate statement took sharp issue with the prevailing view that the revised Guidelines reflect how the FTC actually considers merger cases. To the extent actual agency practice varies from the revised Guidelines, now or in the future, they will have considerably less value to the business community and the antitrust bar than advertised today. If there is a clear conclusion to be drawn, it is that the revised Guidelines reflect a desire by the agencies to redress some of the issues that have hampered past merger challenges, and thus portend increased antitrust scrutiny of mergers, as well as a likely increase in the number of actual challenges.
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