April 7, 2022
On 28 March 2022, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) held their first of four “listening sessions” related to their review of the merger enforcement guidelines. The DOJ and the FTC publish merger guidelines to provide some transparency into the standards that the agencies use when reviewing the legality of mergers and acquisitions under US antitrust law. While guidelines lack the force of law, they provide a valuable analytical framework for the FTC, the DOJ, courts, merging entities and private parties.
The guidelines are updated, but infrequently. The current horizontal merger guidelines were last updated in 2010. The 1984 vertical guidelines were updated in 2020. However, in late 2021, the FTC withdrew its approval of the 2020 version after identifying certain flawed provisions. The DOJ announced that while it was also skeptical of certain provisions, the 2020 vertical guidelines remained effective for the department.
Earlier in 2022, the DOJ and the FTC launched a joint public inquiry that sought public input on ways to update the guidelines in line with modern markets (for further details please see “FTC and DOJ announce plans for merger guidelines overhaul and seek public input“). The agencies are seeking input on all aspects of the guidelines, but have identified five areas of particular interest:
- purpose and scope of merger review;
- presumptions that certain transactions are anticompetitive;
- use of market definition in analyzing competitive effects;
- threats to potential and nascent competition;
- impact of monopsony power, including in labor markets; and
- unique characteristics of digital markets.
The purpose of the listening sessions is to hear directly from businesses, consumers and organizations on the impact of mergers in their industries. The first session was focused on food and agriculture markets. Two independent grocers spoke; however, comments were primarily from the agriculture sector. A transcript and video recording of the first listening session are available on the FTC’s website.
The consistent complaint from all participants was the spillover effect of consolidation and concentration on the ability of small and medium businesses to compete. Several commenters complained that consolidation allowed their larger, merged competitors to exploit suppliers, transport, warehouses and processing capacity, which left them with few to no options. Some shared personal stories of losing suppliers, capacity or business because larger competitors had achieved volume discounts or other contractual terms that limited competitive access.
Many of the commenters asked the agencies to move beyond the “consumer welfare” standard – which, since the 1980s, has leant heavily on lower prices for end consumers – to give substantially more weight to the effects of a merger or acquisition on competitors’ ability to compete in the same and adjacent markets, as well as the spillover effects in upstream and downstream markets. As one farmer commenter noted, the consumer welfare standard pits the consumer against the farmer, while large processors pick up the windfall.
A few commenters also stated that the FTC and the Department of Agriculture are ineffective in regulating and pursuing consumer protection efforts, such as “made in the USA” and “organic” labelling. Several commenters noted that smaller businesses innovate to develop niche markets, only to have those niche markets co-opted by larger entities using lesser standards under the same labels.
Neither FTC Chair Lina Khan nor DOJ Assistant Attorney General Jonathan Kanter took a specific position on the comments, but both noted that the prevalent theme was the harm from consolidation and concentration on competitors’ ability to compete.
While there is no immediate action that stems from this listening session, these comments fit within current discussions in antitrust law, particularly in progressive circles, around “abuse of market power” short of monopolization and the push to expand beyond a narrow focus on consumer welfare through lower prices. Considering the slow turnover rate between guidelines, issuing new horizontal and vertical guidelines with a broader, less consumer welfare-focused standard could influence merger review for over a decade. To the extent the agencies want to re-examine antitrust enforcement in the pricing sphere (for further details please see “Progressive antitrust agenda on pricing: silence before the storm?“), several of the stories serve as real-life examples of the alleged shortcomings of the Robinson-Patman Act, which was intended to protect smaller competitors and their ability to compete against the leverage of larger competitors.
The DOJ and FTC have three additional listening sessions planned:
- 14 April 2022 at 2 o’clock in the afternoon (EST) on health care;
- 27 April 2022 at half past one in the afternoon (EST) on media and entertainment; and
- 12 May 2022 at 2 o’clock in the afternoon (EST) on technology.
Access to the live sessions will be available through the FTC website. Outside these listening sessions, public comments on the merger guidelines are due by 21 April 2022.
This content was originally published on April 7, 2022, via the International Law Office (ILO) newsletter. It can be found here: DOJ and FTC gather real-life stories of impact of consolidation
ILO delivers expert legal commentary, in the form of concise weekly newsletter emails, to senior corporate counsel and law firm partners worldwide. Free to receive, the ILO newsletters have been providing tailored, quality-assured updates on global legal developments to more than 70,000 registered subscribers since 1998. ILO content is generated in collaboration with over 500 of the world’s leading experts and covers more than 100 jurisdictions.