FTC rewrites rules on Big Tech mergers with aim to ease monopoly-busting

Antitrust enforcers released a draft update outlining new rules today that officials say will make it easier to crack down on mergers and acquisitions that could substantially lessen competition in the US.

Now the public has 60 days to review the draft guidelines and submit comments to the Federal Trade Commission (FTC) and the Department of Justice (DOJ) before the agencies' September 18 deadline. A fierce debate has already started between those in support and those who oppose the draft guidelines.

Over the next two months, the FTC hopes to gain widespread public support for what the FTC has positioned as commonsense updates as tech mergers have recently raised complex legal questions. In a press release, FTC Chair Lina M. Khan said that the merger guidelines "contain critical updates" and were "informed by thousands of public comments—spanning healthcare workers, farmers, patient advocates, musicians, and entrepreneurs."

"With these draft Merger Guidelines, we are updating our enforcement manual to reflect the realities of how firms do business in the modern economy," Khan said.

The draft outlines 13 guidelines that "agencies may use when determining whether a merger is unlawfully anticompetitive under the antitrust laws," the FTC's press release said.

According to an FTC fact sheet, these are "the first merger guidelines to cite case precedents" and are built to "reflect the most common issues that arise in merger review." 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.
13. Mergers should not otherwise substantially lessen competition or tend to create a monopoly.

When an agency is attempting to decide if a merger or acquisition should be blocked, the first eight guidelines help agencies "to assess the risk that a merger’s effect may be substantially to lessen competition or to tend to create a monopoly." The next four guidelines help agencies understand the "issues that often arise" when assessing any of the first eight guidelines. The last guideline explains how to consider mergers and acquisitions "that raise competitive concerns not addressed by the other guidelines."

The draft guidelines also include appendices that describe "evidentiary and analytical tools" that agencies have used to detect anticompetitive measures in the past, as well as overviews of several types of rebuttals and legal tests invalidating defenses commonly raised by companies.

In drafting the guidelines, the FTC said that the agencies focused on "three core goals." First, they strove to uphold legal precedent, then to increase transparency and accessibility of guidelines, and finally to make meaningful updates and "provide frameworks that reflect the realities of our modern economy and the best of modern economics and other analytical tools."

The FTC's press release included a statement from Attorney General Merrick B. Garland, who cautioned that "unchecked consolidation threatens the free and fair markets upon which our economy is based."

“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,” Garland said.

Guidelines instantly incite debate

The FTC's fact sheet said that the DOJ and FTC joined forces to draft the guidelines based on "input and work of many career attorneys and economists at both agencies" and "a public comment period that yielded over 5,000 comments."

The DOJ's team was led by DOJ's policy director for its antitrust division, David Lawrence, and economist Susan Athey, an expert in the economics of technology, including expertise in platform markets and market shaping for innovation. The FTC's team was led by FTC attorney Ken Merber and economist Aviv Nevo, an expert in antitrust and competition.

The draft guidelines said that they were designed to "simplify the test of illegality” in some cases where a merger is “so inherently likely to lessen competition substantially that it must be enjoined in the absence of evidence clearly showing that the merger is not likely to have such anticompetitive effects."

But while the agencies have described the guidelines as adhering to laws and case precedent, not everyone agrees with the proposed rules, which appear certain to shake up the current landscape for mergers and acquisitions. The public comment period kicked off with some critics charging that new rules could chill competition, decrease innovation, deny small firms access to valuable capital, and—as US Chamber of Commerce Executive Vice President and Chief Policy Officer Neil Bradley has alleged—"upend decades of bipartisan consensus."

In a press release, Bradley accused the FTC and the DOJ of creating uncertainty and increasing the "burden around the entire merger process." Bradley, who appeared to regard the draft guidelines as anti-business, said that "mergers and acquisitions play an important role in shaping a competitive US business environment," while "typically, less than 3 percent of transactions raise any competitive concerns." He claimed that the agencies were too "quick to dismiss the benefits and efficiencies mergers create for consumers and ignore the positive impact mergers have on innovation" and peddling a narrative that mergers were a bigger problem than they really are.

"The agencies have lost repeatedly in court and these guidelines are a back door attempt to change the law and ignore judicial precedent," Bradley said, suggesting that the FTC and the DOJ drafted new rules to help them block mergers they'd failed to block, like the FTC's recent failure to halt the Microsoft/Activision merger.

Contradicting Bradley, economist Hal Singer tweeted that the FTC's recent losses in court showed precisely why new rules were necessary.

"The current rules, particularly for vertical mergers, are stacked against the agencies and in favor of monopolists," Singer tweeted.

Singer told Ars that the need to reset the evidentiary burdens in antitrust probes has been "percolating for a long time." He said that cases like the Microsoft-Activision deal suggest that currently there's too little enforcement, because if the facts in that case didn't halt the deal, "what fact pattern would?" The risk in leaving the guidelines as they are could then be that the FTC keeps losing and may ultimately stop investigating as many deals, which could result in more monopolies sailing through.

Public Knowledge, a DC-based consumer rights public interest group, had filed comments during the FTC's initial drafting stage, "urging special scrutiny for certain types of vertical mergers and mergers by digital platforms" like the Microsoft-Activision deal. The FTC appeared to incorporate this feedback in the draft guidelines, which was a disappointment to the Computer & Communications Industry Association.

"The merger guidelines lower the bar for what mergers would be presumptively illegal and would take the US a step closer to European-style competition rules by protecting some competitors from competition," CCIA's press release said. "The guidelines specifically call out digital platforms, noting the agencies’ focus on whether a merger harms competition 'between platforms, on a platform or to displace a platform.'”

CCIA President Matt Schruers echoed other critics who feared merger guidelines could chill innovation.

"As technology and AI infuse more sectors of the economy, creating a special set of regulations that apply only to specific companies doesn’t make good legal or economic sense," Schruers said. "Without appropriate revision, these guidelines risk chilling valuable transactions in ways that would weaken US exporters’ ability to compete globally.”

Others argued the guidelines provided long-needed clarity for all stakeholders. Public Knowledge's competition policy director, Charlotte Slaiman, said that "new merger guidelines will be incredibly valuable for courts, antitrust practitioners, business leaders, and advocates" by clearly laying out "the types of mergers that risk substantially lessening competition."

"The Department of Justice and the Federal Trade Commission have completed the Herculean task of bringing together the relevant precedents and up-to-date economics research and distilling it into clear explanations of the law," Slaiman said. "This is a historic step towards a more competitive economy for everyone.”

Defending business interests, Bradley disagreed, saying that draft guidelines could harm small businesses and consumers who have been well-served by the current merger guidelines on the books.

Draft "guidelines are designed to chill merger activity, which will deny smaller companies access to the capital and expertise they need to grow and place US businesses at a disadvantage with their global competitors," Bradley said. "Congress and the courts should continue to reject the agencies’ efforts to undo the consumer welfare standard and decades of antitrust precedent that has served the US economy and consumers so well.”