Federal antitrust guidelines revised
The Justice Department and the Federal Trade Commission have revised the government's policy on how federal agencies will evaluate antitrust considerations in mergers between similar companies, the first major changes since the guidelines were issued in 1992.
The new guidelines for "horizontal mergers" move away from the agencies' previous emphasis on market definition, market share and market concentration and instead delineate a fact-specific process for evaluating potential mergers based on a variety of evidence.
Now when analyzing a potential merger, the government plans to use evidence gathered from the merging parties, customers and industry observers to examine pre-merger business decisions, compare the two companies' behavior and consider the actual effects of similar completed mergers.
Both government representatives and antitrust attorneys in private practice say the revised guidelines, which were released April 19 after a four-month period of evaluation and extended public comment, bring the agencies' written policy in line with how they have approached evaluating proposed mergers in practice.
"It reflects what they're doing, and we may as well know how they're approaching and how they're thinking about evaluating mergers," said Arnold & Porter Partner Deborah L. Feinstein.
Though the Justice Department and the FTC say the revisions differ from the original guidelines in several key ways, attorneys say the most striking tweak is the move away from beginning an evaluation of a particular merger by defining the market in which it operates and replacing it with a more tailored approach that takes into account specific facts relating to the potential competitive effects of the merger at hand.
"Every merger is unique, so that's very helpful for practitioners, agencies and companies," said W. Joseph Price, an associate in Kelley Drye's District office.
The agencies will not ignore market definition entirely, given that its importance has been emphasized in the Clayton and Sherman acts and prior court decisions. Instead, it will now be one of multiple factors that agencies take into consideration.
"They do make clear that in an enforcement action they will identify one or more relevant markets. They said 'we get it, in court we'll have to define a market,' " Feinstein said. "But they will try to move the courts away from a rigid definition."
In addition to the de-emphasis on market definition, attorneys say several other key provisions are a new section in which the agencies list what evidence they have found most helpful in evaluating mergers and tweaks to how they calculate market concentration and consider how ease of entry into a particular market can counteract a potential merger's anti-competitive effects.
Price said it's also "fair to say there's a loosening" in how the agencies will apply the market concentration thresholds. Further, the new guidelines eliminate rigid time frames during which merging parties must show there is opportunity for competition and instead say there must be sufficient opportunity for timely competition so customers won't be harmed by the merger.
Though the changes mean "the line has been moved a little bit," Feinstein said the revised guidelines are "evolutionary rather than revolutionary" and will mainly affect cases on the margin.
"This really in some ways codifies what they've been saying for some time now," she added.