The FTC’s new merger guidelines touch a chord. Big companies won’t like it.
America’s largest companies are at loggerheads with antitrust regulators in the Biden administration. The FTC’s merger interventions have made its chair, Lina Khan, a meme for industry attacks and anathema to some investors.
On Tuesday, the Federal Trade Commission (FTC) and its antitrust counterparts at the Justice Department hosted an online workshop on proposed guidelines for agencies to review their mergers. The guidelines seek to clarify how antitrust regulators will decide to object to a proposed merger. It has been more than a decade since the new guidelines were issued.
As the discussion began on Tuesday, FTC officials said the driving force for the new guidelines is the emergence of digital markets in the US economy. Traditional antitrust analysis considers horizontal mergers between competitors and vertical mergers with suppliers. New thinkers such as Chief Khan said these approaches do not capture all the competitive influences of dominant platforms like Alphabet’s Google search unit (symbol: GOOGL), Illumina’s (ILMN) gene readers, or the graphic art ecosystem. Adobe (ADBE).
The new guidelines say the proposed merger should be evaluated in terms of its effects on competition. However, the document sets certain thresholds for market concentration that would lead to a presumption of harm, requiring the merging companies to prove that their merger was not anti-competitive.
The invited Committee members generally commended the Guidelines.
Announcement – scroll to continue
Stephen Salop, an economist and law professor at Georgetown University, said that market power is not the primary concern of antitrust law, but rather the harms of market power. “You need to focus on the economic damage that consumers, workers and suppliers suffer from reduced competition,” he said.
Barry Nigro Jr., Fred Frank’s antitrust partner, was the committee’s least praised member. He said the percentage of market focus in the draft deviated from the focus on facts that today’s justices seem to favor.
Since the publication of the draft guidelines in July, public comment has accumulated. The sharpest comments from US companies probably won’t emerge until the comment period ends on September 18th.
The proposed guidelines discuss the potential impact of the merger on workers, suppliers and customers – not just consumers. An overwhelming number of commentators are screenwriters from the Writers Guild of America, who are now on strike to protest Hollywood’s digital economy. Many say the growing focus is in giants like Disney (DIS) and Netflix
Announcement – scroll to continue
(NFLX) crippled their livelihood.
While many comments praise the proposed guidelines, others do not. Edward Long, who studies technology and innovation at the James Madison Institute, a free-market think tank, said mergers can increase competition between major rivals.
Hollywood mergers can be beneficial to consumers, Long said, citing Amazon’s 2022 acquisition of MGM Studios. Without this deal, Amazon Prime would have struggled to get content to Amazon Prime customers.
“We should express great concern about the proposed shift away from a standard of consumer welfare to an assumption that large companies are intrinsically bad,” Long said.
Consumer protection has also been cited by the Capital Markets Regulatory Commission, a group launched by financial market players such as Citadel Securities and Citadel Securities.
Announcement – scroll to continue
Virtu Financial (VIRT) has criticized the wide-ranging changes to the trading market proposed by another federal agency, the US Securities and Exchange Commission.
The Capital Markets Group criticized the new lower thresholds for assuming that the market concentration resulting from the merger would hurt competition. The Capital Markets Commission said such measures were incomplete. Instead, the focus should be on whether a merger or acquisition would increase costs for consumers. “Lowering the current thresholds would harm the US economy by restricting economically beneficial merger activity,” the group said.
Announcement – scroll to continue
There will be two more workshops on the guidelines. Agencies hosting Tuesday’s workshop promised to study the day’s criticism carefully. Several committee members said they hoped the final guidelines would include more detail and court citations.
Nigro of Fred Frank said the draft is not clear enough to help him advise corporate boards on proposed mergers. He said: “As someone who has to advise the customer on what is acceptable and what is not, they don’t do enough to describe what is acceptable.”
Judges are another target audience, Salop of Georgetown said, especially since many recently appointed justices view mergers as “not particularly bad.”
These guidelines should educate inexperienced judges about price increases or other general harms that result from mergers that are too easily approved, or ineffective consent remedies.
So the project should contain more economic examples. “We read the Ten Commandments to you,” he criticized the current draft, “but not the Talmud and the newer things.”
Write to Bill Albert at william.alpert@barrons.com
(tags for translation) Regulation/Government Policy
