Feds want to rewrite rules for competition-crushing merger probes
No more embrace-and-extinguish M&As, but budgetary changes may make enforcement harder
The US Federal Trade Commission and Department of Justice have proposed rewritten guidelines on how mergers should be scrutinized by American watchdogs – the goal being to crack down harder on competition-crushing takeovers.
This isn't a whole new set of regulations. Instead, these are draft guidelines [PDF] that agencies can use to "determine a merger's effect on competition in the modern economy and evaluate proposed mergers under the law," the FTC said.
The FTC, now run by Big Tech archcritic Lina Khan, has been taking a more muscular stance on blocking or probing mergers, with mixed results. With these draft changes, some M&A specialists may be left wondering whether the old days of easy regulation are over.
There are 13 guidelines in the proposal, which updates 2010 and 2020-era policy for horizontal and vertical mergers. The Biden administration hopes the guidelines will be clear and accessible to everyone.
The FTC and DoJ have regularly updated their merger guidelines since the first set was published in 1968, reflecting thinking at the time. The rewritten guidelines are as follows, and reflect the administration's desire for a bit more competition in established markets. In the agency's words:
- Mergers should not significantly increase concentration in highly concentrated markets.
- Mergers should not eliminate substantial competition between firms.
- Mergers should not increase the risk of coordination.
- Mergers should not eliminate a potential entrant in a concentrated market.
- Mergers should not substantially lessen competition by creating a firm that controls products or services that its rivals may use to compete.
- Vertical mergers should not create market structures that foreclose competition.
- Mergers should not entrench or extend a dominant position.
- Mergers should not further a trend toward concentration.
- When a merger is part of a series of multiple acquisitions, the agencies may examine the whole series.
- When a merger involves a multi-sided platform, the agencies examine competition between platforms, on a platform, or to displace a platform.
- When a merger involves competing buyers, the agencies examine whether it may substantially lessen competition for workers or other sellers.
- When an acquisition involves partial ownership or minority interests, the agencies examine its impact on competition.
- Mergers should not otherwise substantially lessen competition or tend to create a monopoly.
Khan gets serious
Speaking to CNBC shortly after the proposed guidelines were published and open for comment, Khan said the guidance reflects antitrust law as it currently exists.
"If you look through the document you'll see a lot of footnotes," Khan said. "This document is designed to make sure everyone is on notice about the state of the law."
Khan's FTC has been handed a couple of high-profile antitrust losses this year, first when it was denied a block on Meta's acquisition of VR firm Within, and more recently when the courts denied its attempt to freeze Microsoft from acquiring video games maker Activision Blizzard.
In fact as we were preparing this story, it emerged that the FTC has called off its administrative trial of Microsoft's Activision gobble, clearing the way for settlement discussions and a resolution.
Whether the new guidelines would have helped in those above cases is unclear, though some of the antitrust issues it clarifies will definitely apply to the tech industry.
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For example, there's the first guideline, which says mergers that would further concentrate already concentrated markets are verboten. Concentration is high, the agencies said in the guidelines, when "even a relatively small increase in concentration in a relevant market can provide a basis to presume that a merger is likely to substantially lessen competition."
Guideline seven requires that mergers not entrench a dominant market position, which the White House said means "agencies consider mergers in the context of the broader market and trends, rather than assessing each merger in isolation."
Perhaps no guideline more closely reflects the tech industry than rule ten, which limits mergers among multi-sided platforms that connect two parties, such as Amazon or eBay.
"These kinds of platforms are not new," the White House noted, arguing that "their rising importance and the widespread collection of data to power them justifies a more explicit treatment of how related mergers may be assessed."
Blogger and activist Cory Doctorow pointed out that the proposed guidelines (specifically, number nine) also make clear that the private-equity habit of buying companies, loading them up with debt, and stripping them of assets is undesirable. In such cases, even if a single acquisition wouldn't on its own lessen competition, "an anticompetitive pattern or strategy of multiple small acquisitions in the same or related business lines" may be enough to raise anti-competition flags, the FTC said.
Unfortunately, it might be harder for the FTC and DoJ to fight antitrust battles in the near future, regardless of whether the rules by which to do so are made clearer by the new guidelines.
Tucked away in the Senate's FY24 appropriations bill [PDF] for Commerce, Justice, Science and related agencies, which passed its committee vote 28-1 in mid-July, is a savage cut in funding for the DoJ's antitrust division. Per the bill, $50 million is being transferred from salaries and expenses for the antitrust division to "justice operations, management and accountability."
According to American Economic Liberties Project fellow Matt Stoller, that's a 20 percent cut, perfectly timed to step on regulators increasingly focused on reining in Big Tech.
"Odd to move money from Antitrust Division which is taking on big tech to the division doing support for DOJ leadership," Stoller said in a tweet.
We asked the DoJ about the guidelines and to inquire more about the funding cuts, and didn't hear back. The FTC told us it had no further comment about the draft guidelines nor how they may affect its antitrust strategy.
The deadline for public comments on the guidelines closes on September 18, at which time the DoJ and FTC will get to work on a final version. ®