Proposed New US Draft Merger Guidelines

On 19 July 2023, the U.S Federal Trade Commission (FTC) and US Department of Justice (DOJ) jointly,

announced the release of proposed new Merger Guidelines. The Draft Guidelines are based on 13 core principles and seek to build upon, expand, and clarify frameworks set out in previous versions. The 13 principles are:

  1. Mergers should not significantly increase concentration in highly concentrated markets;
  2. Mergers should not eliminate substantial competition between firms;
  3. Mergers should not increase the risk of coordination;
  4. Mergers should not eliminate a potential entrant in a concentrated market;
  5. Mergers should not substantially lessen competition by creating a firm that controls products or services that its rivals may use to compete;
  6. Vertical mergers should not create market structures that foreclose competition;
  7. Mergers should not entrench or extend a dominant position;
  8. Mergers should not further a trend toward concentration;
  9. When a merger is part of a series of multiple acquisitions, the agencies may examine the whole series;
  10. When a merger involves a multi-sided platform, the agencies examine competition between platforms, on a platform, or to displace a platform;
  11. When a merger involves competing buyers, the agencies examine whether it may substantially lessen competition for workers or other sellers;
  12. When an acquisition involves partial ownership or minority interests, the agencies examine its impact on competition; and
  13. Mergers should not otherwise substantially lessen competition or tend to create a monopoly;

The draft Guidelines depart from the current guidelines in several important areas including:

  • Market Concentration: The proposed Guidelines lower the thresholds at which the Agencies will view markets as highly concentrated, by about seven hundred points. These thresholds are mainly used in evaluating the potential for a horizontal merger to impact competition.
  • Multiple and minority-stake transactions. The draft Guidelines bolster the Agencies’ recent efforts to challenge private equity transactions by expressly treating as relevant not just individual transactions, but also the cumulative effect of a pattern or strategy of acquisitions.
  • “Flailing firm” defense. The draft Guidelines reject the flailing firm defence which has previously allowed parties to merge where the acquirer showed that, in the absence of the merger, the target’s competitive strength would sharply diminish i.e., as a result of bankruptcy or reorganization.

It is noteworthy that some have argued that the proposed merger guidelines reflect a reversion to enforcement standards that have been out of favor for several decades, are generally more hostile to business combinations, and which may result in a wider range of mergers and acquisitions facing antitrust challenges in the US. Members of the public have been invited to provide comments on the guidelines by 18 September 2023.

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