How long will the brand-new U.S. vertical merger guidelines last?
For the first time in 35 years, the U.S. antitrust agencies have issued new draft Enforcement Guidelines for Vertical Mergers.
The Guidelines are intended to provide a roadmap for how the U.S. agencies will analyse mergers between companies active at different levels of the supply chain. But the next presidential election could mean the Guidelines won’t make it to their first anniversary. A Democrat-led U.S. DOJ Antitrust Division and Federal Trade Commission may well withdraw the Guidelines as one of their first official acts.
It’s been done before and there are signs it would happen again.
A month after an Obama appointee was confirmed as head of the Antitrust Division, the agency withdrew the Monopolisation Guidelines issued less than a year earlier under the Bush Administration. Then in 2018, the Trump Administration’s Antitrust Division withdrew its support for the Merger Remedies Guidelines.
Two FTC Commissioners and several commentators have said the draft Guidelines don’t go far enough. At the FTC, Commissioners Chopra and Slaughter each issued separate statements that agreed only that the current guidelines needed updating. Otherwise, they suggested the draft Guidelines need to consider a broader range of harms, be more grounded in the real-world observation of past vertical mergers and put a greater burden on companies to demonstrate that the merger won’t harm competition and claimed efficiencies can be verified. They also criticized the 20% safe-harbour as lacking an empirical basis.
Commentators have also observed that the current draft Guidelines don’t provide enough detail or practical guidance. They say that the Guidelines should describe the evidence the agencies will consider, are too focused on price effects and don’t provide insight on the types of remedies that would be appropriate in case a vertical merger is deemed harmful.
The economic consensus has been that vertical mergers are most often pro-competitive. But more progressive commentators, including presidential candidates, have pushed in recent years for a change to the status quo. They seek greater enforcement against mergers generally, particularly among large companies in technology and healthcare sectors. They are concerned when large tech companies acquire small, nascent competitors. For this reason, they would object to Guidelines that are too permissive and might not give a small competitor the chance to grow into a challenger to one of the big tech platforms.
The Guidelines have been issued in draft for public comment until February 11. While we can expect that significant suggestions will be submitted, the nature of all enforcement guidelines is that they reflect a common denominator. As a result, it’s hard to see that the final Guidelines would reflect a material change.
And then, we’ll need to wait and see how the 2020 election unfolds.