On April 20, 2010, the Department of Justice and Federal Trade Commission jointly issued new Proposed Horizontal Merger Guidelines (Proposed Guidelines) for public comment. The Proposed Guidelines would replace the agencies’ existing Horizontal Merger Guidelines (Current Guidelines), last revised in 1997. The Proposed Guidelines can be found here.
What’s New in the Proposed Horizontal Merger Guidelines?
The Proposed Guidelines represent a substantial revision to the Current Guidelines and describe a more “flexible” approach to merger review. A handful of revisions stand out:
- First, the Proposed Guidelines reduce the emphasis on defining a single “relevant antitrust market” in favor of greater focus on the competitive effects of the merger – regardless of the market in which those effects occur.
- Second, the agencies recommend raising the market concentration thresholds that would trigger closer scrutiny of a merger.
- Third, the Proposed Guidelines place greater emphasis on “unilateral effects” of mergers, rather than the traditional focus on “coordinated effects.”
- Fourth, the agencies identify specific economic analytical techniques (e.g., diversion ratios, critical loss analysis, upward pricing pressure analysis) that they will use to test competitive effects.
What’s the Practical Impact of the New Proposed Merger Guidelines?
The general consensus is that although the Proposed Guidelines contain significant revisions, these changes merely make explicit the analytical approach the DOJ and FTC already use to review mergers. Critics complain, however, that this “flexible” approach is designed to allow the agencies to “have their cake and eat it too”—permitting them to win under either a traditional relevant market analysis, or an alternative economic analysis. The agencies’ codification of this more “flexible” approach likely reflects their reaction to difficulties they experienced in recent high-profile cases, such as their failures to block the Whole Foods-Wild Oats, Oracle-PeopleSoft and Western Refining-Giant Industries mergers. It remains to be seen whether the agencies will succeed in shifting merger review standards. The agencies still must win in court in the context of an existing body of case law that may not prove as “flexible” as the Proposed Guidelines. Indeed, in the first test of whether courts will accept such alternative economic analysis (the “upward pricing pressure test”) in place of traditional market definition to prove anticompetitive effects of a merger, the Southern District of New York rejected this approach, citing “the case law’s clear requirement that a Plaintiff allege a particular product market in which competition will be impaired.” City of New York v. Group Health, Inc., et al., No. 06 Civ. 13122 (S.D.N.Y. May 11, 2010) at 7 n.6.