On December 18, 2023, the Federal Trade Commission and the Justice Department jointly issued the 2023 Merger Guidelines, which describe factors and frameworks the agencies utilize when reviewing mergers and acquisitions. The Guidelines identify the procedures and enforcement practices the Department of Justice and the Federal Trade Commission most often use to investigate whether mergers violate the antitrust laws.
A full list of the Federal Trade Commission’s and the Justice Department’s thirteen guidelines is as follows …
(1) Mergers should not significantly increase concentration in highly concentrated markets. The New Guidelines lower the market concentration-based thresholds for deeming a transaction as illegal. At a high level, under the prior guidelines, a market with four equally sized firms (i.e., all have 25% market share) would be “highly concentrated”; under the New Guidelines, a market with five equally sized firms would be “highly concentrated.” In other words, the New Guidelines expand the scope of markets deemed to be highly concentrated.
(2) Mergers should not eliminate substantial competition between firms. This principle allows the Agencies to presume a merger to be illegal based on the closeness of competition between the companies where the Agencies believe market shares are difficult to measure or understate the companies’ competitive significance to each other. This principle provides room to maneuver for the Agencies when a transaction’s market shares do not meet with established structural presumptions elsewhere in the New Guidelines.
(3) Mergers should not increase the risk of coordination. Similar to prior iterations of merger guidelines, the New Guidelines warn that mergers may increase the risk of coordination by remaining firms. Three primary factors will guide the Agencies’ analysis: (a) market concentration; (b) prior coordination or attempts in the market; and (c) whether the merger eliminates a “maverick” firm. The Agencies will also consider how transparent the market is, how competitors remain post-transaction, homogeneity of productions, pricing algorithms, incentives, and other advantages that coordination might bring in that specific market.
(4) Mergers should not eliminate a potential entrant in a concentrated market. Consistent with their concern about “killer” acquisitions, the Agencies will examine whether a transaction would eliminate a potential entrant or current competitive pressure from a perceived potential entrant.
(5) Mergers should not substantially lessen competition by creating a firm that controls products or services that its rivals may use to compete. This principle eliminates the distinction between horizontal and vertical mergers to focus instead on whether the merged firm controls access to products or services that its rivals use to compete. Again, the New Guidelines provide flexibility to the Agencies when a transaction does not involve traditional supply or distributor relationships.
(6) Vertical mergers should not create market structures that foreclose competition. The New Guidelines define a “foreclosure share” as the share of the market that would be controlled by the merged entity and that could be used to foreclose competitors’ access to a related product or service. The Agencies will deem vertical deals that result in a foreclosure share of at least 50% as presumptively illegal. Below that threshold, the Agencies will consider a range of factors, including whether the purpose of the merger is to foreclose rivals.
(7) Mergers should not entrench or extend a dominant position. In lieu of a holistic look at the market, the New Guidelines establish a single-firm market share threshold that presumes illegal any horizontal transaction that results in a market share of 30% or higher.
(8) Mergers should not further a trend toward concentration. The Agencies will look at whether a horizontal transaction contributes to “steadily increasing” concentration levels and whether a vertical transaction “would ultimately result” in foreclosure concerns. The Agencies will also examine the pace of concentration, such as a significant jump in concentration.
(9) When a merger is part of a series of multiple acquisitions, the agency may examine the whole series. The Agencies intend to address the cumulative impact of serial acquisitions, sometimes referred to as “roll-up” transactions. Companies must now consider the total impact of several deals rather than just the current transaction.
(10) When a merger involves a multi-sided platform, the Agencies examine competition between platforms, on a platform, or to displace a platform. The New Guidelines discuss platform competition at length, noting that, “the Agencies will seek to prohibit a merger that harms competition within a relevant market for any product or service offered on a platform to any group of participants— i.e., around one side of the platform.” In other words, when reviewing a deal involving platform providers, the Agencies are emphasizing that they will look for any problems on any part of the platform or in how those platforms compete as part of the antitrust assessment. The New Guidelines also place significant emphasis on potential conflicts with platform operators that are also platform participants.
(11) When a merger involves competing buyers, the Agencies examine whether it may substantially lessen competition for workers or other sellers. The New Guidelines confirm the Agencies will consider, and include as a key investigatory issue, the competitive effects of concentration between buyers for worker talent. The New Guidelines provide little detail on when the Agencies might actually challenge a merger on labor-related grounds, but the tone and articulation of the discussion of labor markets represents a substantial shift in the regulators’ approach to merger reviews versus prior administrations.
(12) When an acquisition involves partial ownership or minority interests, the Agencies examine its impact on competition. The New Guidelines discuss how acquisitions of partial ownership or minority interests can violate the antitrust laws. While not new, the choice to emphasize this area suggests the Agencies are bringing a renewed focus to transactions in which acquiring persons are taking only partial control but may have an outsized influence over the operations of the acquired company.
(13) Mergers should not otherwise substantially lessen competition or tend to create a monopoly. The Agencies included a catch-all category to clarify that the New Guidelines are not exhaustive, and not every transaction will fit neatly into one of the above principles.