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The Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) (together the Agencies) gave us a year-end “gift,” publishing their final, 2023 Merger Guidelines, (2023 Guidelines) – just 5 months after they published their draft. Unlike prior guidelines1, the 2023 Guidelines are not specifically for “horizontal” mergers (where entities are in same level of commerce) or “vertical” mergers (where entities have a supplier/purchaser relationship). These 2023 Guidelines are broad enough to apply to any merger or acquisition the Agencies choose to investigate. And a reminder – a merger or acquisition does not have to meet the Hart-Scott-Rodino (HSR) pre-merger notification thresholds for the Agencies to investigate.

The 2023 Guidelines, as we said in our reporting on the draft version, reflect what the Agencies see today as the key themes they have pursued in recent cases and advocacy in their more aggressive enforcement position, including concerns about concentration of markets, serial acquisitions, competition in labor markets, information sharing, multi-sided platforms, and practices by dominant firms that cement their position and harm competition.

Due to the detailed nature of the 2023 Guidelines, this Alert provides a high-level overview of the 2023 Guidelines and key takeaways. A more in-depth review and analysis of the 2023 Guidelines, and how they might apply to specific industries, will follow in the new year.

The Highlights

To say these 2023 Guidelines are expansive in the transactions they address would be an understatement. The tone of the 2023 Guidelines emphasizes early detection of mergers or acquisitions that could potentially reduce competition, stating “Section 7 was designed to arrest anticompetitive tendencies in their incipiency.” Throughout the text, the Agencies emphasize identifying potential harms, preventing reduction of competition, and predicting what could happen as the result of a merger or acquisition.

In press releases and in social media posts, as well as in the 2023 Guidelines themselves, the Agencies repeatedly use the term “market realities”2 to describe their approach in creating the 2023 Guidelines. They believe that there have been so many changes in industries, the economy, and the way businesses interact with each other since the 2010 Guidelines that sweeping changes were needed; but also that they may apply these 2023 Guidelines differently depending on the industry and potential harm they see from a proposed merger or acquisition.

There are 11 specific guidelines – down from 13 in the draft version3 – divided into essentially two parts. As the Agencies explain, “Guidelines 1-6 describe distinct frameworks the Agencies use to identify that a merger raises prima facie concerns, and Guidelines 7-11 explain how to apply those frameworks in several specific settings.” In other words, Guidelines 1 through 6 apply generally to any merger and will be the lens through which the Agencies evaluate those mergers, while Guidelines 7 through 11 discuss certain specific scenarios and how the Agencies would evaluate those. However, simply because a scenario is not described specifically in the 2023 Guidelines, it does not mean that the Agencies would not investigate it.

The 11 guidelines are:

  1. Mergers Raise a Presumption of Illegality When They Significantly Increase Concentration in a Highly Concentrated Market. The Agencies will presume a merger or acquisition is illegal if the HHI4 is greater than 1,800 and the change in HHI is greater than 100. The Agencies will also presume a merger or acquisition is illegal if the merged firm’s market share is greater than 30% and the change in HHI is greater than 100. These thresholds are much lower than the prior 2010 Guidelines.
  2. Mergers Can Violate the Law When They Eliminate Substantial Competition Between Firms. The Agencies will examine whether the two merging firms view each other as key competitors and, if so, will look at their merger more closely.
  3. Mergers Can Violate the Law When They Increase the Risk of Coordination. A merger or acquisition may make it more likely that merging firms could easily tacitly coordinate. The Agencies will look at factors such as whether the market is concentrated, whether there were prior attempts to coordinate, whether one of the merging firms is a maverick, whether the behavior of other firms in the market is easily observable (through public pricing or information exchanges), and barriers to entry.
  4. Mergers Can Violate the Law When They Eliminate a Potential Entrant in a Concentrated Market. The Agencies will look at an acquisition of a nascent competitor with suspicion, explaining that the fact that a potential competitor is not actually currently participating in a market does not mean that the acquisition is without harm.
  5. Mergers Can Violate the Law When They Create a Firm That May Limit Access to Products or Services That Its Rivals Use to Compete. While not explicitly addressing vertical mergers, this guideline explains that the Agencies will look closely at a merger or acquisition that results in the foreclosure of access to a necessary product by rivals.
  6. Mergers Can Violate the Law When They Entrench or Extend a Dominant Position. This guideline seemingly permits the Agencies to investigate any merger or acquisition by a firm with an already dominant position. It also describes that the Agencies may investigate a merger or acquisition that would extend a firm’s dominant position into a different but related market.
  7. When an Industry Undergoes a Trend Toward Consolidation, the Agencies Consider Whether It Increases the Risk a Merger May Substantially Lessen Competition or Tend to Create a Monopoly.  When an industry is “trending toward consolidation” the Agencies will look at mergers and acquisitions in that industry, whether horizontal or vertical, with more scrutiny.
  8. When a Merger is Part of a Series of Multiple Acquisitions, the Agencies May Examine the Whole Series. The Agencies will not limit their review to just the current merger or acquisition if the acquiring company has a history of making other acquisitions. The Agencies will look at the trend of acquisitions as a whole.
  9. When a Merger Involves a Multi-Sided Platform, the Agencies Examine Competition Between Platforms, on a Platform, or to Displace a Platform.  Mergers or acquisitions involving platforms that provide products or services to two or more different groups will be examined for their effect on each group independently and together, and examined for the potential to displace other competing platforms.
  10. When a Merger Involves Competing Buyers, the Agencies Examine Whether It May Substantially Lessen Competition for Workers, Creators, Suppliers, or Other Providers.  This is the guideline that will allow the Agencies to examine the effects of a merger or acquisition on workers, using the theories laid out in guidelines 1-6.
  11. When an Acquisition Involves Partial Ownership or Minority Interests, the Agencies Examine Its Impact on Competition. Taking a broad definition of “acquisition,” the Agencies are now laying out that even a minority interest falls under the purview of Section 7 and may challenge minority interests that may “soften” competition or lead to the exchange of competitively sensitive information.

The 2023 Guidelines also contain a section on potential rebuttals to the presumption of harm a merger or acquisition may warrant (e.g., failing firm), and a section with more detail on analytical, economic, and evidentiary tools the Agencies may use. While the Agencies list certain rebuttal arguments that are possible, as frequently stated throughout the 2023 Guidelines, the stronger the presumption of harm, the stronger the rebuttal evidence must be.

Notably, the 2023 Guidelines do NOT contain any safe harbors or information on what the Agencies will NOT investigate. In fact, the 2023 Guidelines are so broad that the Agencies could investigate almost any merger or acquisition.

The good news is that 1) businesses now have a final version of merger guidelines after being without any merger guidelines for two years; 2) these do not have the force of law, albeit are used by courts as reference, and 3) the expansive nature of the 2023 Guidelines should come as no surprise, given the Agencies repeated articulation—and enforcement activity—consistent with them.

Key Takeaways 

  • Unless a merger or acquisition has no competitive harm (i.e., is not between competitors or is not between entities in a vertical relationship) or is clearly below the concentration and market share thresholds, companies contemplating a merger or acquisition should conduct at least a preliminary U.S. antitrust analysis using the 2023 Guidelines.
  • Companies should understand that making a series of smaller acquisitions of similar or competing companies will not insulate them from antitrust scrutiny; that prior acquisitions will not be ignored when a current acquisition is being investigated; and that such serial transactions are on the Agencies’ radar.
  • Acquiring a minority interest in a company will not insulate the acquiror from antitrust scrutiny particularly if that interest provides the acquiror with some control or even influence or facilitates the sharing of competitively sensitive information.
  • A merger may be challenged based on the effects it has on workers as an independent theory of harm; thus even if a merger does not harm consumers, if it could harm workers, the Agencies may still investigate and seek to challenge it.
  • Mergers of companies that are under the prima facie HHI and market share thresholds but in industries that are already consolidated or “trending toward consolidation” may face scrutiny they have not faced before.
  • Although there is no guideline that specifically addresses vertical mergers, several of the guidelines note that foreclosing access to supply or customers, or reducing rivals’ access to a necessary input, would be grounds to challenge a proposed merger or acquisition. This theory can be used to challenge vertical mergers.
  • Information sharing, even through legitimate means such as third-party administered surveys, will be used as evidence to demonstrate that a merger or acquisition may be competitively harmful. 

In Part Two, we will examine each of these 11 guidelines more closely. In the meantime, the antitrust team at Buchanan is available to assist.

  1. The last version of Merger Guidelines were the 2010 Horizontal Merger Guidelines and the 2020 Vertical Merger Guidelines, both of which were withdrawn in 2021.
  2. The guideline specific to vertical mergers was removed, as well as a catch all guideline that was titled “Mergers Should Not Otherwise Substantially Lessen Competition or Tend to Create a Monopoly.”  
  3. HHI is the Herfindahl-Hirschman Index and is defined as the sum of the squares of the market shares of the firms in the industry.  
  4. The term appears 8 times in the 2023 Guidelines.