The U.S. Department of Justice and Federal Trade Commission 2023 Merger Guidelines: An Account and a Few Positive and Many Negative Assessments

Antitrust Risk in Practice Mergers: A Framework for Evaluation

How would competition policy be shaped if it were to explicitly favor Schumpeterian (dynamic) competition over neoclassical (static) competition? Schumpeterian competition is the kind of competition that is engendered by product and process innovation. Such competition does not merely bring price competition. It tends to overturn the existing order. A “neo-Schumpeterian” framework for antitrust analysis that favors dynamic competition over static competition would put less weight on market share and concentration in the assessment of market power and more weight on assessing potential competition and enterprise-level capabilities. By embedding recent developments in evolutionary economics, the behavioral theory of the firm, and strategic management into antitrust analysis, one can develop a more robust framework for antitrust economics. Such a framework is likely to ease remaining tensions between antitrust and intellectual property. It is also likely to reduce confidence in the standard tools of antitrust economics when the business environment manifests rapid technological change. It appears that the Antitrust Division of the U.S. Department of Justice (DOJ) has attempted to incorporate more dynamic analysis, but the result has been inconsistent across different mergers and different doctrinal areas of antitrust law. Moreover, a complicating factor in the transformation of the law is the fact that the federal courts have, by embracing the reasoning in the Merger Guidelines promulgated several decades ago by the Antitrust Division and the Federal Trade Commission (FTC), caused antitrust case law to ossify around a decidedly static view of antitrust. Put differently, in the years since 1980, the Division and the FTC have successfully persuaded the courts to adopt a more explicit economic approach to merger analysis, yet one that has a static view of competition. The result is not a mere policy preference. It is law. To change that law to have a more dynamic view of competition will therefore require a sustained intellectual effort by the enforcement agencies (as well as by scholars and practitioners) that, once more, engages the courts to re-examine antitrust law, as they did in the late 1970s during the ascendancy of the Chicago School, when antitrust law became infused with its current, static understanding of competition. A necessary but not sufficient condition for that effort is a public process by which the Division and the FTC revisit and restate the Merger Guidelines in a manner that clarifies and defends the role of dynamic competition in antitrust analysis. We therefore applaud the announcement of the antitrust agencies in September 2009 to solicit public comment on the possibility of updating the Merger Guidelines. Assuming that the Division and the FTC decide to revise the existing Merger Guidelines, those revised guidelines (and useful complementary undertakings, such as generalized guidelines on market power and remedies) then will require leadership by the enforcement agencies to persuade the courts that antitrust doctrine should evolve accordingly. That neo-Schumpeterian process may take a decade or longer to accomplish, but it is a path that we believe the Roberts Court is willing to travel.

The US appears to lean towards the model of unconcentrated and distributed competition regulation agencies, instead of a single concentrated one. Aside from the states and private litigants, in practice, this model mainly runs through the Department of Justice (DOJ), via its Antitrust Division, and the Federal Trade Commission (FTC)’s enforcement. Traditionally, under developments of the regulatory approach, the ‘quasi-judicial’ FTC could be understood to be a cornerstone of US antitrust law, particularly in its practical enforcement. However, it appears that the DOJ contributes far more policies on the specific regulation of mergers as well as consumption of merger remedies. By analysing the US model of ‘inter-agency competition’ under perspectives of merger control, this writing leads to proof that the DOJ is a dominant actor to some extent. More significantly, the DOJ’s performances partially bring the FTC and others to the uniformity of stipulated mergers as well as approved remedy fashions. Merger regulation, merger remedies, merger guidelines, DOJ, FTC, clearance process, Sherman Act, Clayton Act, HSR Act, US antitrust.

This paper introduces the Special Issue of the Review of Industrial Organization that studies the impact of the 2010 Horizontal Merger Guidelines after 10 yearsOn August 19, 2010, the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) issued newly updated Horizontal Merger Guidelines (2010 Guidelines) [See https://www.ftc.gov/sites/default/files/attachments/merger-review/100819hmg.pdf.]. The 2010 Guidelines begin by stating:“These Guidelines outline the principal analytical techniques, practices, and the enforcement policy of the Department of Justice and the Federal Trade Commission (the “Agencies”) with respect to mergers and acquisitions involving actual or potential competitors (“horizontal mergers”) under the federal antitrust laws.”Since the first Merger Guidelines were issued by the DOJ 1968, the merger guidelines have been an important channel by which economic research and learning affects antitrust enforcement. Each iteration of the merger guidelines has reflected the economic thinking of the day. Each iteration also has made a substantial impact on merger enforcement and the development of antitrust law. This special issue examines the impact of the 2010 Merger Guidelines after 10 years.

Healthcare services markets display a trend toward concentration in recent decades. 1,887 hospital mergers have been announced in the United States between 1998 and 2021. In one regional market—really, in several regional markets—the University of Pittsburgh Medical Center (UPMC) acquired twenty-eight hospitals between 1996 and 2019. UPMC’s consolidating tendency has not slowed down into the present: in June of 2023, UPMC signed a non-binding letter of intent to affiliate with the Washington Health System, which consists of two hospitals. Meanwhile, in December of 2023, the two federal agencies empowered to enforce federal antitrust law, the Federal Trade Commission (FTC) and the Department of Justice (DOJ), released new merger guidelines thatsignal a more aggressive approach to Section 7 of the Clayton Antitrust Act in seeking injunctions against corporate mergers. The new guidelines above all signal a stronger presumption of illegality with respect to mergers and thus require less concrete evidence of a merger’s future individualized detrimental impacts on consumer welfare than previous guidelines for FTC or DOJ’s antitrust division to prosecute such mergers. Whether these guidelines will acquire cachet in the courts and change the state of antitrust law as we know it is an open question.Similarly, in February of 2023, the Department of Justice retracted Clinton-era policy statements creating an “antitrust safety zone” for hospital mergers. This Note will consider how the changes in FTC and DOJ policy signaled by the 2023 guidelines bear upon the healthcare services market. Though ultimately it is not likely that the shift in the agencies’ policies will be perfectly reflected in judicial decisions, healthcare administrators and their legal counsel concerned with the expense of litigation can consult this Note to understand how the FTC and DOJ will analyze mergers in their industry under the new guidelines.

Bridging Parallel Universes

ANTITRUST AND INEQUALITY

What is the relevant market in private international law? Determining the applicable law in antitrust and unfair competition law is one of the first questions in international damages claims. From a European perspective, the lex fori in private enforcement actions is Art. 6 Rome II Regulation. Here, the connecting factor is the relevant market. There is extensive literature on the market definition in antitrust law. However, there is a long-standing debate on how to approach the relevant market in antitrust and unfair competition law in the context of private international law. The purpose of this paper is to define the relevant market in private international law. It examines whether the market definition from antitrust law can be used to determine the applicable law. Also, it will examine whether the connecting factors in international antitrust and unfair competition law correspond (Art. 6(3)(a) and Art. 6(1) Rome II Regulation). Finally, several approaches to restrict the effects doctrine and the impact principle in antitrust and unfair competition law are discussed. The discussion follows the method of legal interpretation enriched with economic arguments, which have been largely ignored in previous debates.

Anticompetitive Effects and Market Definition in Platform (and Non-Platform) Markets

Can the standard merger analysis of the Department of Justice's and Federal Trade Commission's Horizontal Merger Guidelines accommodate mergers in high-technology industries? In its April 2007 report to Congress, the Antitrust Modernization Commission (AMC) answered that question in the affirmative. Still, some antitrust lawyers and economists advocate exceptions to the rules for particular transactions. In the proposed XM-Sirius merger, for example, proponents argue that the Merger Guidelines be relaxed to accommodate their transaction because satellite radio is a nascent, high-technology industry characterized by “dynamic demand.” We argue that the AMC correctly refrained from recommending high-tech exceptions for defining markets in merger proceedings. Merger proponents naturally seek to expand the relevant product market as much as possible. But if alternative products are included in the relevant market without a showing of significant cross-price elasticities—that is, without evidence of buyer substitution between the two products in response to a relative change in prices—then market definition is unbounded. The XM-Sirius merger also follows a recent trend of prosecutorial inaction in merger reviews. The Antitrust Division's use of a higher standard for intervention than the incipiency standard in Section 7 of the Clayton Act increases the risk of false negatives. Finally, the XM-Sirius merger exemplifies the use of preemptive offers of merger conditions by the merger parties to gain political favor and to allocate postmerger rents to influential third-party intervenors. The most significant preemptive concessions were XM's and Sirius's offer to freeze the monthly subscription price at the premerger monthly rate of $12.95 and to offer a variety of new tiered program packages that XM and Sirius characterized as “a-la-carte.” These offers presumably were intended to neutralize the traditional antitrust concerns that a merger among direct competitors leads to higher prices and to win the support of certain vital constituencies. To the contrary, we argue that the offer to freeze prices could reduce welfare and that the Federal Communications Commission and the Department of Justice lack the authority to create a rate-regulated monopoly for satellite radio. Furthermore, because the “a-la-carte” offering would not hold constant other nonprice factors, consumer surplus could fall.

Accountable Care Organizations: A Balancing Act

Comments of J. Gregory Sidak and David J. Teece before the Federal Trade Commission & U.S. Department of Justice on the Horizontal Merger Guidelines Review Project

Comparative Deterrence from Private Enforcement and Criminal Enforcement of the U.S. Antitrust Laws

Market definition is essential to merger analysis. Because no standard approach to market definition exists, opposing parties in antitrust cases often disagree about the extent of the market. These differences have been particularly relevant in the hospital industry, where the courts have denied seven of eight merger challenges since 1994, due largely to disagreements over geographic market definition. We compare geographic markets produced using common ad hoc methodologies to a method that directly applies the "SSNIP test" to hospitals in California using a structural model. Our results suggest that previously employed methods overstate hospital demand elasticities by a factor of 2.4 to 3.4 and define larger markets than would be implied by the merger guidelines's hypothetical monopolist test. The use of these methods in differentiated product industries may lead to mistaken geographic market delineation, and was likely a contributing factor to the permissive legal environment for hospital mergers.

Should the E-Book Case Presage the Decline of the Per Se and Market Share Doctrines