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The Federal Trade Commission and the Department of Justice Antitrust Division Announce New Merger Enforcement Guidelines
The Federal Trade Commission (FTC) and the Department of Justice Antitrust Division have released new guidelines on how they will enforce merger law, addressing the challenges of the digital age and a changing market. The guidelines apply to both vertical and horizontal mergers, defining a vertical merger as a transaction between two businesses in different parts of the supply chain, while horizontal mergers involve companies that compete in the same market. This move follows the withdrawal of the previous vertical merger guidelines in 2020, which were deemed flawed by the FTC.
Maintaining Competitive Markets
The new guidelines outline 13 points that the agencies will use to evaluate whether a merger should be blocked. These include ensuring that mergers do not increase concentration in highly concentrated markets, eliminate competition between firms, increase the risk of coordination, eliminate potential entrants in concentrated markets, or lessen competition by creating a firm that controls products or services used by rivals. The guidelines also emphasize preventing mergers that create market structures that limit competition, entrench or extend a dominant position, or contribute to a trend of concentration.
Addressing Modern Concerns
The new guidelines include key updates related to competition for workers and the impact of mergers on multi-sided platforms like Amazon that serve consumers and businesses. The agencies may now broaden the types of deals they review, examining a series of acquisitions rather than just a single merger. This reflects the FTC's previous action against Facebook parent Meta in 2020, where a series of acquisitions were seen as a strategy to maintain alleged monopoly power. The guidelines aim to provide clarity to judges, who rarely encounter antitrust cases, and ensure a modernized approach to enforcement efforts in today's economy.
Next Steps and Potential Impact
The draft guidelines are open for public comment until September 18, 2023. After reviewing the comments, the agencies will consider revisions before final publication. However, the longevity of the guidelines may depend on the future political landscape after the 2024 presidential election. It is worth noting that the FTC withdrew the previous version of the guidelines just over a year after their official release. Nonetheless, these guidelines represent an updated approach to enforcing merger law and demonstrate the agencies' commitment to adapting to the evolving market dynamics of the digital age.
Implications for New Businesses
The newly announced merger enforcement guidelines by the FTC and the Department of Justice Antitrust Division are expected to have significant implications for new businesses entering the tech market. With a focus on maintaining competitive markets and addressing modern concerns, these guidelines aim to promote fair competition and prevent anti-competitive practices.
For new businesses hoping to enter industries that are already highly concentrated or dominated by a few major players, these guidelines offer a ray of hope. The agencies' commitment to preventing mergers that increase concentration in already concentrated markets will create a more level playing field for emerging companies. This means that new entrants will have the opportunity to compete on equal footing, without the fear of being stifled by dominant market players.
Additionally, the guidelines' emphasis on preventing mergers that create market structures limiting competition or contributing to a trend of concentration is crucial. This signals the agencies' recognition of the importance of maintaining a diverse and vibrant marketplace. For new businesses, this is encouraging as it means they will have a fair chance to disrupt existing market structures and introduce innovative solutions to meet consumer needs.
Furthermore, the guidelines' consideration of acquisitions as part of a broader series of deals for review is notable. This approach acknowledges the strategic tactics employed by some companies, such as a string of acquisitions to maintain or expand their market power. By scrutinizing such acquisitions, the agencies can ensure that new businesses are not unfairly overshadowed or excluded from the market.
However, it is important to note that the future political landscape and potential changes in leadership could impact the longevity of these guidelines. New businesses should stay informed about any updates or revisions that may occur after the public comment period. Nonetheless, the introduction of these updated guidelines demonstrates the agencies' commitment to adapting to the digital age and fostering a competitive environment for new businesses to thrive.
In conclusion, the new merger enforcement guidelines aim to promote fair competition and provide opportunities for new businesses to enter and succeed in various industries. These guidelines address modern concerns, encourage market diversification, and scrutinize potential anti-competitive practices. New businesses should carefully consider these guidelines and leverage them to navigate the evolving market dynamics of the digital age.
Article First Published at: https://www.cnbc.com/2023/07/19/ftc-and-doj-lay-out-rules-for-merger-review-to-reflect-digital-economy.html