DOJ, FTC Propose New Guidelines for Evaluating Mergers

Recently, we told you about the steep decline in mergers and acquisitions as documented in an Intelligize report on dealmaking in 2022. The research showed that companies aren’t announcing as many deals as they have in the past. Moreover, more deals are getting terminated before they can be completed.

Now, a new round of proposed merger guidelines released by the Department of Justice and Federal Trade Commission might turn down the temperature in an already chilly market even more. “As markets and commercial realities change, it is vital that we adapt our law enforcement tools to keep pace so that we can protect competition in a manner that reflects the intricacies of our modern economy,” said Jonathan Kanter, assistant attorney general of the DOJ Antitrust Division. In an interview with CNBC, Kanter emphasized that the government doesn’t want to “pick winners and losers” but would rather allow for opportunities to “build a business from the ground up.”

The proposal includes 13 guidelines couched in broad language that fits the overall ethos of U.S. antitrust law. For example, one principle maintains that “mergers should not eliminate substantial competition between firms.” Another says that “mergers should not increase the risk of coordination.” Pretty standard anti-monopoly stuff.

You could interpret the new guidelines as a sign that the DOJ and FTC haven’t lost their fighting spirit after a series of losses in antitrust cases in the courts. (If you can’t beat ‘em, change the rules on ‘em?) Regulators have sustained high-profile setbacks, in particular, in their efforts to get big tech in line. Last month’s decision in the U.S. District Court for the Northern District of California against the FTC’s attempt to block Microsoft’s $68.7 billion acquisition of video game maker Activision Blizzard represented an especially high-profile defeat.

Like other media outlets, Axios noted that regulators seemingly crafted the measures with big tech in mind. Notably, one of the guidelines refers to policing deals involving “multi-sided platforms” – think Amazon. An FTC official said the principle has particular relevance for digital markets and was informed by previous efforts to apply antitrust law in the sector.

But proposing new rules is only part of the battle for regulatory authorities. The guidelines have to hold up to scrutiny in the courts, too, and business interests will assuredly mount a legal challenge to them. The proposed merger between grocery chains Kroger Co. and Albertsons Cos. could produce the first litigation related to draft rules. If the recent record is any indication, the DOJ and FTC may find themselves seeking another approach on antitrust enforcement soon enough. Lawyers from Davis Polk pointed out that “that some of the theories set forth in the Draft Guidelines have already been rejected by courts in recent agency merger challenges.”

For its part, the U.S. Chamber of Commerce wasted little time in blasting the proposal. Regulatory agencies have decided to “peddle a false narrative on concentration in our economy,” according to Neil Bradley, executive vice president and chief policy officer of the Chamber.

“Congress and the courts should continue to reject the agencies’ efforts to undo the consumer welfare standard and decades of antitrust precedent that has served the U.S. economy and consumers so well,” Bradley said.