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Federal Trade Commission and Justice Department Issue Highly Anticipated Merger Guidelines

December 20, 2023

Federal Trade Commission and Justice Department Issue Highly Anticipated Merger Guidelines

December 20, 2023

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If the agencies believe that a presumption of a violation has been established, they may contend that is sufficient to establish a prima facie case that there is a reasonable probability of substantially adverse effect on competition.

On December 18, 2023, the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) jointly issued new Merger Guidelines. The new guidelines amend, update and replace the numerous versions of merger guidelines previously issued by both agencies, including the 2010 Horizontal Merger Guidelines and the Vertical Merger Guidelines that were issued in 2020 and later withdrawn by the FTC in 2021. Below are our key takeaways, followed by some discussion of how the agencies apply the guidelines and then a deeper-dive into some industry-specific considerations.

Key Takeaways

  • Merger guidelines provide the “procedures and enforcement practices” of the agencies, but they are not law. Past merger guidelines have been cited by courts, but it will be interesting to see how the courts treat the new guidelines.
  • Consistent with recent removals of safety zones from longstanding agency enforcement policies, the Merger Guidelines remove references to mergers that typically do not raise concerns.
  • They lower the threshold for the structural presumption of a violation based on the Herfindahl-Hirshman Index of market-share-based concentration in horizontal transactions.
  • They emphasize presumptions and anti-competitive effects in vertical deals that could lead to more scrutiny of such transactions.
  • Consistent with a focus on consolidation driven by private equity firms, they raise concerns with serial transactions and with common and cross-ownership of firms.
  • The new guidelines consider the impact of new technology, including pricing algorithms and other predictive tools that could facilitate coordination.
  • There is a heavy emphasis on protecting workers of merging firms, departing from the agencies’ traditional focus on preventing price increases and improving efficiency.

What Are Merger Guidelines and How Do the Agencies Use Them?

The federal antitrust laws have traditionally been viewed as promoting competition and consumer welfare. Section 7 of the Clayton Act prohibits an acquisition of assets and voting securities where “in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” For several decades, the DOJ and FTC have issued and, from time to time, revised merger guidelines explaining their enforcement policy regarding mergers and acquisitions and how they approach analyzing whether a proposed transaction should be challenged in an enforcement action under the antitrust laws, including Section 7 of the Clayton Act.

The new guidelines focus on identifying potential bases for a presumption that the effect of the merger under investigation may be to substantially lessen competition or tend to create a monopoly, as set forth in Guidelines 1-6. Guidelines 7-11 offer specific settings for evaluating the frameworks in Guidelines 1-6. If the agencies believe that a presumption of a violation has been established, they may contend that is sufficient to establish a prima facie case that there is a reasonable probability of substantially adverse effect on competition. Section 3 of the new guidelines explains the type of evidence the agencies may consider to rebut any presumption of a violation. Section 4 of the new guidelines provides additional tools used by the agencies in evaluating mergers, including how they define relevant markets within which to assess competition under Guidelines 1-11.

The specific guidelines are as follows:

Guideline 1: Mergers Raise a Presumption of Illegality When They Significantly Increase Concentration in a Highly Concentrated Market.

Guideline 2: Mergers Can Violate the Law When They Eliminate Substantial Competition Between Firms.

Guideline 3: Mergers Can Violate the Law When They Increase the Risk of Coordination.

Guideline 4: Mergers Can Violate the Law When They Eliminate a Potential Entrant in a Concentrated Market.

Guideline 5: Mergers Can Violate the Law When They Create a Firm That May Limit Access to Products or Services That Its Rivals Use to Compete.

Guideline 6: Mergers Can Violate the Law When They Entrench or Extend a Dominant Position.

Guideline 7: When an Industry Undergoes a Trend Toward Consolidation, the Agencies Consider Whether It Increases the Risk a Merger May Substantially Lessen Competition or Tend to Create a Monopoly.

Guideline 8: When a Merger Is Part of a Series of Multiple Acquisitions, the Agencies May Examine the Whole Series.

Guideline 9: When a Merger Involves a Multi-Sided Platform, the Agencies Examine Competition Between Platforms, on a Platform, or to Displace a Platform.

Guideline 10: When a Merger Involves Competing Buyers, the Agencies Examine Whether It May Substantially Lessen Competition for Workers, Creators, Suppliers, or Other Providers.

Guideline 11: When an Acquisition Involves Partial Ownership or Minority Interests, the Agencies Examine Its Impact on Competition.

How Are the New Guidelines Different?

The new guidelines are different from prior merger guidelines in at least six respects.

First, the 2023 Merger Guidelines substantially lower the threshold for a structural presumption of a violation of Section 7 of the Clayton Act based on level and increase of concentration in a market, and remove references in prior merger guidelines to the level and increase in concentration that typically do not raise concerns.

The Herfindahl-Hirshman Index (HHI) is defined as the sum of the squares of the market shares of participants in the relevant market and has been used for decades to measure market concentration levels. For example, in a monopoly, one firm has a 100 percent market share and the HHI would be 10,000. The agencies also measure the change in HHI due to a merger by subtracting the pre-merger HHI from the post-merger HHI.

Previously, in the 2010 Horizontal Merger Guidelines, markets with an HHI below 1,500 were considered unconcentrated, and mergers in such markets were considered unlikely to have anti-competitive effects. Small changes in HHI of less than 100 were also considered unlikely to have adverse competitive effects. The 2023 guidelines do not provide similar safe harbors. The 2010 Horizontal Merger Guidelines also provided that mergers resulting in markets with HHI above 2,500 and a change in HHI of more than 200 points would be presumed to be likely to enhance market power.

In the 2023 Merger Guidelines, however, an 1,800 post-transaction HHI with at least a 100 point increase is presumed to be illegal. The new guidelines also add a presumption based on a post-transaction 30 percent market share with a 100 point increase in HHI. By way of example, an increase of just 2 percent market share from 28 percent to 30 percent would increase the HHI by over 100 points.

Second, the new guidelines articulate several other bases on which the agencies, as a matter of enforcement policy, would presume a violation―and they seek to translate that significant change in agency enforcement policy into presumptions purportedly establishing a prima facie case of a violation to be applied by the courts. The agencies seem to be attempting to shift the burden onto the merging parties to negate the ultimate conclusion that there is a reasonable probability that a merger will substantially lessen competition. The presumptions in the new guidelines appear to blur agency enforcement policy with articulation of the agencies’ view of substantive antitrust law, which varies from prevailing law in the courts. This blurring could be particularly problematic with respect to the FTC’s internal enforcement process in which the commissioners not only approve complaints, but also rule on the substance of merger challenges following internal administrative proceedings (which are under increasing scrutiny).

Third, the new guidelines preview that increased enforcement activity is likely in vertical transactions. Coupled with the FTC victory in the Fifth Circuit in the Illumina-Grail matter, which the 2023 guidelines cite on a few occasions, the new guidelines articulate several aspects of how the agencies may seek to establish, through presumption or otherwise, adverse effects on competition, while omitting any thoughtful discussion of well-recognized potential procompetitive effects of vertical mergers. Instead of weighing pro-competitive effects against potential adverse effects on competition, the new guidelines seek to relegate procompetitive effects to simply rebuttal evidence in the form of “efficiencies,” which have always been recognized as a potential defense, but rarely applied in analysis in the courts to save a merger from a violation.

Fourth, the new guidelines target private equity. They highlight that the agencies will consider a series of multiple acquisitions when evaluating a merger the agencies consider to be part of that series and will also examine general trends toward consolidation in particular industries. This focus is consistent with recent scrutiny of roll-ups in the healthcare space. The new guidelines also highlight concerns by the agencies with both cross-ownership (holding noncontrolling interest in a competitor) and common ownership (individual investors hold noncontrolling interests in firms with a competitive relationship) that could impact private equity firms in particular.

Fifth, big tech platforms will likely continue to be in the agencies’ crosshairs, including by looking back or forward at smaller acquisitions that may enhance or extend dominant positions based on technology platforms or arguably eliminate potential competition. The agencies are reserving significant leeway in scrutinizing tech transactions by noting that “[m]ergers involving platforms can threaten competition, even when a platform merges with a firm that is neither a direct competitor nor in a traditional vertical relationship with the platform.” Moreover, despite not referring to “artificial intelligence” specifically, as the agencies did in the draft, the agencies are focused on whether technology, including pricing algorithms and predictive behavior technology, can facilitate coordination among competing firms.

Finally, the new guidelines reinforce a clear focus by the agencies on protecting workers of merging firms. In the past, synergies and efficiencies advanced by the merger parties included reductions in labor costs that would lead to lower prices to consumers of the products produced by the merging parties. The new guidelines consider whether merging parties are competing buyers of labor, and the agencies highlight that the “level of concentration at which competition concerns arise may be lower in labor markets than in product markets.”


The FTC and DOJ intend for the 2023 Merger Guidelines to identify the procedures and enforcement practices of the agencies in ways that “reflect modern market realities.” FTC Chair Lina M. Khan stated that they “reflect the new realities of how firms do business in the modern economy,” and Assistant Attorney General Jonathan Kanter of the Antitrust Division noted that the 2023 guidelines “reflect how competition plays out in modern markets.”

But the new guidelines also indicate that the agencies are generally averse to growth through strategic acquisitions. Attorney General Merrick B. Garland noted that DOJ is particularly concerned with protecting the American people from “the ways in which unlawful, anticompetitive practices manifest themselves in our modern economy.” The new guidelines suggest various ways in which the agencies are intentionally becoming more aggressive in challenging mergers. The agencies will likely use the new guidelines to justify increased enforcement, which is part of their stated intent in revising the guidelines. Revisions to the HSR reporting requirements to assist the agencies in that effort are in process. The short-term result will likely be more investigations, more challenges and more litigation as the courts sort out whether the agencies’ efforts to challenge more mergers are warranted under the law in the context of specific transactions, industries and markets.

For More Information

If you have any questions about this Alert, please contact Sean P. McConnell, Edward G. Biester III, Brian H. Pandya, Christopher H. Casey, Sarah O'Laughlin Kulik, any of the attorneys in our Antitrust and Competition Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.