An Expert Look at the 2023 Merger Guidelines
Last month, the United States Department of Justice (DOJ) and Federal Trade Commission (FTC) issued the 2023 Merger Guidelines, a draft of which was published in July. During TransPerfect Legal’s Antitrust Clearance & Merger Enforcement conference held early this fall, a panel of esteemed antitrust lawyers commented on the guidelines and their likely impact on merger review proceedings. The following summarizes the key takeaways from that panel.
Significant, but Expected Changes
While the 2023 Merger Guidelines represent a significant overhaul of the 2010 guidelines, none of the larger changes were especially surprising to the panelists, given the public pronouncements and agenda of the regulatory agencies since the start of the Biden administration. Indeed, the new guidelines are focused on the very objectives articulated by FTC Commission Lina Khan and Assistant Attorney General Jonathan Kanter since their appointments: preventing the formation of large conglomerates, discouraging large market share in any one company, and ensuring competitive labor practices.
Expanded Scope of Antitrust Analysis
The panel noted that the new guidelines expand the scope of what transactions are likely to be scrutinized in several ways. Any one firm owning a 30% structural presumption of the relevant market will come under scrutiny, regardless of the size of the specific transaction at issue. The experts noted that this is a shift to think not about whether a particular transaction substantially lessens competition in a vacuum, but more of a holistic focus on the industry in which the transaction is happening.
Similarly, there is a noticeable expansion in scope shifting from a focus on horizontal transactions to also vertical ones. Notably, this is similar to how the EU thinks about antitrust in terms of conglomerates. The panelists commented that historically, the U.S. has been the one to influence how other jurisdictions approach antitrust regulation, but here we are seeing the U.S. taking guidance from the EU.
Another guideline expanding the scope of deals that will be investigated is surrounding serial acquisitions. If a single buyer engages in a multitude of transactions, will the regulators attempt to learn about future planned deals when evaluating the HSR filing of the first or just file that information away in case a second deal is filed?
The final new focus that is important to note is the focus on how a transaction will affect a labor market, with a focus on competitive conditions for workers, not just consumers.
Outdated Case Law
Another topic of note by the panel was that none of the case law cited in the new guidelines is recent, and one panelist went so far as to call it "the greatest hits of Supreme Court case law from the sixties, seventies, and eighties." The most recent case cited was from 2001, and case law–and even the fundamental way the world does business–has changed drastically since then. This choice supports what the enforcers are trying to do, but the antitrust defense bar has expressed concern that the law being cited does not necessarily make sense in the context of recent legal and business developments.
Guidelines Promote Transparency
The expert panel also highlighted that the guidelines were drafted to be very clear and in a manner that reflects the perspectives of many stakeholders, including staff attorneys and economists, not just management's views.
The guidelines are also written in straightforward and clear terms that business people can understand, so the panelists commented it will theoretically be easier for antitrust lawyers to advise their clients which transactions may be subject to more scrutiny and likely to receive a second request.
However, the agencies are unpredictable in what they will investigate–as one panelist put it, "It's the Wild West." Still, the experts commented that the guidelines do give a sense of what the agencies are thinking and do try to make merging parties more aware of antitrust as an issue in advance. They're coming to their lawyers earlier, who then have an opportunity to not just explore horizontal issues, but an opportunity to explore vertical issues, conglomerate issues, and innovation concerns, and to undertake a comprehensive legal analysis upfront, rather than waiting until after signing a deal, which was historically common.
Generally, the panelists all agreed that lawyers will need to be especially thoughtful when preparing defenses as the regulators appear more dubious than before. So, there is increased skepticism about the types of rebuttal defenses that merging parties might be able to use in future proceedings, noted the panelists.
Ultimately, the consensus view from the expert panel was that these guidelines are likely to lead to an increase in second requests issued. That said, just because the agencies are likely to challenge more transactions, that does not mean that the courts will agree with their interpretation of the law in these guidelines to block the transactions.
These are just guidelines and not the law, and the panel noted that the agencies' track record in court has not been very good when challenging deals. The experts prognosticated that parties doing large deals are unlikely to be deterred by the potential costs and headaches of receiving a second request, but that prospect might discourage parties from doing smaller deals. The panelists also queried whether these guidelines are likely to survive should the administration change in 2024.