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DOJ, FTC Release Guidelines on Horizontal Mergers

By Joe Palazzolo

Christine Varney (doj)

The Justice Department and the Federal Trade Commission on Thursday released new guidelines for regulators to use in evaluating mergers between rival companies.

The changes, proposed in April and finalized this month, mark the first significant revisions to the horizontal-merger guidelines in 18 years.

As expected, the revised guidelines move away from a formal, step-by-step approach that begins with defining the market in which the merging companies operate. In the past decade, both agencies have lost merger challenges in court, hamstrung in part by their own guidelines.

As highlighted by the Justice Department, the new guidelines

Clarify that merger analysis does not use a single methodology, but is a fact-specific process through which the agencies use a variety of tools to analyze the evidence to determine whether a merger may substantially lessen competition.

Introduce a new section on ?Evidence of Adverse Competitive Effects.?  This section discusses several categories and sources of evidence that the agencies, in their experience, have found informative in predicting the likely competitive effects of mergers.

Explain that market definition is not an end in itself or a necessary starting point of merger analysis, and market concentration is a tool that is useful to the extent it illuminates the merger?s likely competitive effects.

Provide an updated explanation of the hypothetical monopolist test used to define relevant antitrust markets and how the agencies implement that test in practice.

Update the concentration thresholds that determine whether a transaction warrants further scrutiny by the agencies.

Provide an expanded discussion of how the agencies evaluate unilateral competitive effects, including effects on innovation.

Provide an updated section on coordinated effects.  The guidelines clarify that coordinated effects, like unilateral effects, include conduct not otherwise condemned by the antitrust laws.

Provide a simplified discussion of how the agencies evaluate whether entry into the relevant market is so easy that a merger is not likely to enhance market power.

Add new sections on powerful buyers, mergers between competing buyers, and partial acquisitions.

?The revised guidelines better reflect the agencies? actual practices,? said Christine Varney, Assistant Attorney General for the Antitrust Division, in a statement. ?The guidelines provide more clarity and transparency, and will provide businesses with an even greater understanding of how we review transactions.”

Said FTC Chairman Jon Leibowitz in an accompanying statement:  ?Because of the hard work of all involved at both agencies, private parties and judges will be better equipped to understand how the agencies evaluate deals. That improvement in clarity and predictability will benefit everyone.”

The guidelines are available here.

Full post as published by Main Justice on August 19, 2010 (boomark / email).