The two US antitrust enforcement agencies – the Department of Justice (DOJ) and Federal Trade Commission (FTC) – have released draft guidelines that lay the groundwork for tougher scrutiny of future deals by large companies, particularly Big Tech ones.

The DOJ and FTC said in their joint press release that the goal of the update is to better reflect how the agencies determine a merger’s effect on competition in the US economy and evaluate proposed mergers under the law.

The agencies also said the new guidelines reflect changes in how the courts have decided merger cases and how business practices have evolved.

Free and fair markets

“Unchecked consolidation threatens the free and fair markets upon which our economy is based,” said Attorney General Merrick B. Garland. “These updated Merger Guidelines respond to modern market realities and will enable the Justice Department to transparently and effectively protect the American people from the damage that anticompetitive mergers cause.”

FTC Chair Lina M Khan said the agencies’ draft merger guidelines were informed by more than 5,000 members of the public — spanning healthcare workers, farmers, patient advocates, musicians, and entrepreneurs and reflect the realities of how firms do business in the modern economy.

The agencies encouraged the public to review the draft and provide feedback through a public comment period that will last 60 days.

13 principles for mergers

The guidelines give an overview of 13 principles, or “guidelines,” that the agencies may use when determining whether a merger is unlawfully anticompetitive under the antitrust laws. The guidelines are not mutually exclusive, and a given merger may implicate multiple guidelines.

The 13 Guidelines are:

1. Mergers should not significantly increase concentration in highly concentrated markets;
2. Mergers should not eliminate substantial competition between firms;
3. Mergers should not increase the risk of coordination;
4. Mergers should not eliminate a potential entrant in a concentrated market;
5. Mergers should not substantially lessen competition by creating a firm that controls products or services that its rivals may use to compete;
6. Vertical mergers should not create market structures that foreclose competition;
7. Mergers should not entrench or extend a dominant position;
8. Mergers should not further a trend toward concentration;
9. When a merger is part of a series of multiple acquisitions, the agencies may examine the whole series;
10. When a merger involves a multi-sided platform, the agencies examine competition between platforms, on a platform, or to displace a platform;
11. When a merger involves competing buyers, the agencies examine whether it may substantially lessen competition for workers or other sellers;
12. When an acquisition involves partial ownership or minority interests, the agencies examine its impact on competition; and
13. Mergers should not otherwise substantially lessen competition or tend to create a monopoly.

Specific references to tech firms

The draft guidelines document specifically addresses how authorities will examine deals that involve social-media networks and other platforms that connect users or buyers and sellers.

The draft specifies that a merger should not eliminate a potential entrant in a concentrated market or create a situation in which a firm buys a company that provides inputs for the acquirer’s competitors.

It also questions whether platform owners should be able to acquire companies that sell on the platform. “A platform operator that is also a platform participant has a conflict of interest from the incentive to give its own products and services an advantage against other competitors participating on the platform, harming competition,” the draft guidelines say.

“A platform operator that is also a platform participant has a conflict of interest from the incentive to give its own products and services an advantage.”

Draft guidelines on mergers, DOJ and FTC, July 19, 2023

“Where a merger between employers may substantially lessen competition for workers, that reduction in labor market competition may lower wages or slow wage growth, worsen benefits or working conditions,” the guidelines say.

This is in keeping with an executive order from the Biden White House in July 2021 that said a lack of competition drives up prices for consumers and drives down wages for workers.

The draft guidelines would replace guidelines issued in 2010 on companies buying competitors and the more recent 2020 guidelines on companies merging with suppliers.

The updated version lowers the bar for deciding when a merger is presumptively illegal because it would result in a high degree of industry concentration or a market share for the combined firm of more than 30%. 

One interesting change from the 2010 guidelines is this: The updated version lowers the bar for deciding when a merger is presumptively illegal because it would result in a high degree of industry concentration or a market share for the combined firm of more than 30%. 

The 2010 guidelines had raised the threshold for when markets were highly concentrated, and these draft guidelines restore the 30% market share amount.

Mergers and US court decisions

The FTC and DOJ have lost several important cases in the anti-trust arena recently, so the question remains as to whether any final guidelines can actually persuade reluctant jurists to be as strict as the agencies’ 13 principles would have them be.

This month, the FTC lost its bid to stop Microsoft’s $69bn deal to buy Activision. The Ninth Circuit Court of Appeals denied the FTC’s appeal, meaning Microsoft was given the green light to carry through with its acquisition – if it can get approval from the UK’s Competition and Markets Authority.

The British regulator has pushed back its final decision so it can consider Microsoft’s argument that new developments mean its blockbuster purchase of the Call of Duty game maker should go through.

Apple not acting as monopoly

In April, Apple won its federal appeals court battle with Fortnite maker Epic Games over its App Store policies. The US Ninth Circuit Court of Appeals’ decision upholds a lower court ruling that found Apple is not acting as a monopoly in the distribution of iOS apps, and that Apple did not violate antitrust laws by requiring app developers to use Apple’s proprietary in-app payment systems.

(The appeals court did agree with the lower court, however, that Apple violated California’s unfair competition law when, in its developer agreement, Apple forbade Epic from informing iOS users about other ways they could pay for in-game virtual currency besides using Apple’s in-app payment system.)

In February, the FTC lost in federal court a case intended to stop Meta Platforms from buying virtual reality content maker Within Unlimited, rejecting the regulator’s concerns the deal would reduce competition in a new market.