WASHINGTON — Today, the Federal Trade Commission (FTC) and the Justice Department’s Antitrust Division launched a joint public investigation aimed at bolstering the fight against illegal mergers. Recent data indicates that many industries in the economy are becoming more concentrated and less competitive, jeopardizing the choice and economic gains of consumers, workers, entrepreneurs and small businesses. These issues are likely to persist or worsen due to an ongoing merger spree that has more than doubled merger filings from 2020 to 2021. To address growing concerns, agencies are seeking public comment on ways to modernize federal merger guidelines to better detect, and prevent, anti-competitive agreements in today’s modern markets.
“Illegal mergers can inflict a host of damages, ranging from higher prices and lower wages to reduced opportunity, reduced innovation and less resilience,” said FTC Chairman Lina M. Khan. “This investigation launched by the FTC and the DOJ is designed to ensure that our merger guidelines accurately reflect the realities of the modern marketplace and enable us to vigorously enforce the law against illegal agreements. Listening to a broad spectrum of market players, especially those who have experienced first-hand the effects of mergers and acquisitions, will be essential to our efforts.
“Our country depends on competition to drive progress, innovation and prosperity,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “We need to understand why so many industries have too few competitors and think carefully about how to ensure our merger enforcement tools are fit for the modern economy.”
Competition is essential to the success of the economy. It ensures that Americans have the freedom to choose between different providers and different employers. When companies face competition, it motivates them to improve their products, develop new ones and lower prices. Mergers can reduce choices for consumers, workers and other businesses, leaving them increasingly dependent on larger, more powerful corporations that have gained greater power to dictate the terms of their agreements. To protect competition and prevent further consolidation, Congress passed a series of antitrust laws and authorized the FTC and the Department of Justice to enforce them.
Antitrust laws direct the FTC and the Department of Justice to prevent mergers that could substantially lessen competition or create a monopoly. The Merger Guidelines are frameworks for analyzing mergers under antitrust laws. The Department of Justice first issued merger guidelines in 1968, in an effort to provide transparency in the standards it applies when reviewing mergers. Since then, the agencies have issued a number of updates, generally clarified according to whether the transaction is considered horizontal (within the same market) or vertical (within the same supply chain). Although the guidelines identify some of the adverse competitive effects of mergers, markets may not be covered by the current approach.
The public inquiry launched today is seeking comment on the changing modern economy and new evidence of the effects of mergers on competition to inform potential revisions to the guidelines. The agencies encourage the public, including market participants, government entities, economists, lawyers, academics, unions, employees, farmers, workers, businesses, franchisees and consumers, to share comments, evidence and ideas. that can inform revisions to the guidelines. Some of the specific areas of investigation on which the agencies are seeking public comment and information include:
- Purpose and scope of merger review: The agencies seek information on whether the guidelines explain and implement the legal prohibition of transactions that “may” substantially lessen competition or tend to create a monopoly, and what harms are contemplated by these standards. The agencies further invite comments on whether the distinctions between horizontal and vertical transactions reflected in the guidelines should be reconsidered in light of trends in modern economics.
- Presumptions that certain transactions are anti-competitive: The Guidelines identify certain market circumstances that justify a presumption of competitive harm based on market concentration. Agencies seek information on whether concentration thresholds should be adjusted to improve enforcement efficiency and effectiveness, whether other measures or qualitative factors should also trigger presumptions of competitive harm, and evidence concerning the accuracy of these presumptions.
- Use of market definition in the analysis of competitive effects: The agencies are seeking feedback on potential updates to the guidelines’ market definition analysis to better account for non-price competition. They also seek to determine when direct evidence of a transaction’s likely effects on competition, such as evidence of direct competition, may eliminate the need for a separate market definition exercise.
- Threats to potential and nascent competition: The agencies seek feedback on potential updates to the guidelines’ discussion of potential and nascent competitors, which can be key sources of innovation and competition.
- Impact of monopsony power, including on labor markets: The agencies seek feedback on how to address buyer power in more detail in the guidelines. Labor markets are a key example of purchasing power, and agencies are seeking information on how guidelines should analyze the labor market effects of mergers.
- Unique characteristics of digital marketplaces: Agencies seek information on how to account for key areas of the modern economy such as digital markets in guidelines, which often include features such as zero-priced products, multi-sided markets and data aggregation which the current guidelines do not address in detail.
The request for information is available at: https://www.regulations.gov/docket/FTC-2022-0003/document.
The comment period is open for 60 days. Comments may be submitted to regulation.gov and should be received by Monday, March 21, 2022. The information will be used by the agencies to consider updates and revisions to the guidance. If such revisions are considered in light of the evidence received and the agencies’ independent research, the agencies will publish proposed guidelines for public comment.
At a press conference, Speaker Lina M. Khan delivered a speech, as did Assistant Attorney General Jonathan Kanter. Commissioners Noah Joshua Phillips and Christine S. Wilson released a statement.